royal hali İplİk tekstİl mobİlya sanayİ ve tİcaret …2).pdfroyal hali İplİk tekstİl...

ROYAL HALI İPLİK TEKSTİL MOBİLYA SANAYİ VE

TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

AND INDEPENDENT AUDITOR’S REPORT

FOR THE PERIOD ENDED AT 30 JUNE 2013

ROYAL HALI İPLİK TEKSTİL MOBİLYA SANAYİ VE TİCARET ANONİM ŞİRKETİ

AND ITS SUBSIDIARY

CONTENTS

Independent Auditors’ Opinion

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes In Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements


AND ITS SUBSIDIARY

CONSOLIDATED BALANCE SHEETS AS OF

30 JUNE 2013, 31 DECEMBER 2012 AND 2011 (Currency - Turkish Lira ‘TRY’ unless expressed otherwise.)

Restated Restated

Current

Period Prior Period Prior Period

Reviewed Audited Audited

Footnote

References 30.06.2013 31.12.2012 31.12.2011

ASSETS

Current Assets

157,128,747 109,403,695 133,232,492

Cash And Cash Equivalents 8 563,110 1,662,350 881,903

Trade Receivables 10 79,828,412 58,750,401 73,855,282

- Due from related parties

3,738,324 9,529,594 810,274

- Due from other parties

76,090,088 49,220,807 73,045,008

Other Receivables 11 18,598,662 9,957,455 19,704,628


382,197 833,101 -

- Receivables from other parties

18,216,465 9,124,354 19,704,628

Inventories 13 45,133,769 31,571,879 31,527,036

Prepaid Expenses 14 6,295,054 1,412,032 1,609,542

Assets Relevant to Current Period Taxes 30 1,580,982 4,708,498 489,467

Other Current Assets 21 1,832,508 1,341,080 5,164,634

Non-Current Assets Classified Held For Sale 29 3,296,250 - -

Non - Current Assets

136,186,456 120,915,467 141,582,029

Trade Receivables 10 636,268 348,725 166,100


- - -


636,268 348,725 166,100

Other Receivables 11 4,397,069 1,337,501 1,804,738


- - -


4,397,069 1,337,501 1,804,738

Tangible Assets 15 117,530,983 105,355,002 125,785,583

Intangible Assets 16 5,950,117 6,594,689 8,487,381

Prepaid Expences 14 696,516 1,826,108 2,055,867

Defferred Tax Assets 30 6,975,503 5,453,442 3,282,360

TOTAL ASSETS

293,315,203 230,319,162 274,814,521

The accompanying notes are an integral part of these financial statements.

(*) Causes and effects of restatement are explained in Note 2.a.


AND ITS SUBSIDIARY

CONSOLIDATED BALANCE SHEETS AS OF

30 JUNE 2013, 31 DECEMBER 2012 AND 2011 (Currency - Turkish Lira ‘TRY’ unless expressed otherwise.)

Restated Restated

Current

Period Prior Period Prior Period

Reviewed Audited Audited

Footnote

References 30.06.2013 31.12.2012 31.12.2011

LIABILITIES

Current Liabilities 65,041,365 68,375,073 143,247,992

Financial Borrowings 9 2,702,621 10,370,232 6,924,435

Current Installment of Long Term Financial

Borrowings 9 7,878,327 9,658,807 52,747,738

Trade Payables 10 30,566,297 29,116,523 60,839,187

- Due to related parties 31,331 161,643 3,289,585

- Due to other parties 30,534,966 28,954,880 57,549,602

Employee benefit obligations 12 1,230,861 638,428 448,948

Other Payables 11 127,362 135,622 41,869

Defferred Income 14 18,408,569 10,388,841 22,178,199

Current Tax Liabilities 30 3,442,062 7,287,514 -

Provision For Short Term Payables 18 685,266 779,106 67,616

Non-Current Liabilities 43,797,550 25,191,500 24,539,082

Financial Borrowings 9 25,056,695 8,194,127 4,751,025

Trade Payables 10 4,085,385 4,930,606 7,999,467

Deferred Income 14 4,004,791 1,281,250 1,746,313

Provision For Benefits Provided To Employees 20 959,316 837,992 514,781

Deferred Tax Liabilities 30 9,691,363 9,947,525 9,527,496

SHAREHOLDERS' EQUITY 184,476,288 136,752,589 107,027,447

Parent Company’s Equity 184,572,829 136,752,589 107,027,447

Paid In Capital 22.1 60,000,000 50,000,000 46,878,214

Inflation Adjustments of Shareholder's Equity 22.2 746,913 746,913 746,913

Share Premium/Discount 22.3 31,399,971 - -

Accumulated Other Comprehensive

Income/(Expenses) Not to Be Reclassified

on Profit or Loss

- Actuarial loss / income from retirement pay

provision 22.4 (190,602) (178,940) (154,357)

- Changes in reveluation of tangible

fixed assets 22.6 38,131,798 39,380,414 54,717,554

Effect of Business Mergers Subject to Joint

Control and Joint Ventures 22.5 (2,390,557) - -

Restricted Reserves 22.7 2,972,851 1,116,622 436,059

Retained Earnings / Losses 22.8 43,831,351 3,722,501 1,930,919

Net Income / Loss For The Period 31 10,071,104 41,965,079 2,472,145

Minority Interest 22.9 (96,541) - -

TOTAL EQUITY 293,315,203 230,319,162 274,814,521


(*) Causes and effects of restatement are explained in Note 2a.


AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE PERIODS ENDED AT 30 JUNE 2013 AND 2012 (Currency - Turkish Lira ‘TRY’ unless expressed otherwise.)

Restated

Restated

Reviewed Reviewed Reviewed Reviewed

Footnote

References

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

OPERATING ACTIVITIES

Sales 23.1 116,894,772 110,696,512 62,633,438 57,959,743

Cost of Sales (-) 23.2 (81,246,110) (79,315,164) (43,507,324) (41,611,455)

GROSS PROFIT / (LOSS)

35,648,662 31,381,348 19,126,114 16,348,288

General Administrative Expenses (-) 25.1 (3,911,389) (3,693,222) (2,062,127) (1,768,117)

Marketing & Sales and Distribution

Expenses (-) 25.2 (14,912,895) (12,462,112) (6,602,613) (6,219,716)

Research & Development Expenses(-) 25.3 (79,526) (53,490) (48,963) (36,967)

Other Operating Income 26 4,414,950 10,924,119 1,822,436 3,521,701

Other Operating Expenses (-) 26 (5,517,823) (10,023,746) (3,211,667) (4,507,175)

NET OPERATING PROFIT / (LOSS)

15,641,979 16,072,897 9,023,180 7,338,014

Investment Activities Income 27 58,226 401,378 20,416 323,694

Investment Activities Expenses (-) 27 (124,183) (136,280) (52,378) (87,163)

OPERATING PROFIT / (LOSS) BEFORE

FINANCE INCOME / (EXPENSE) 15,576,022 16,337,995 8,991,218 7,574,545

Finance Incomes 28 767,652 9,144,462 556,423 2,097,743

Finance Expenses(-) 28 (3,398,639) (4,856,783) (2,273,517) (2,914,669)

OPERATİNG ACTİVİTY PROFİT /

(LOSS) BEFORE TAXATION 12,945,035 20,625,674 7,274,124 6,757,619

Operating Activity Tax Income /

(Expense) (3,123,042) (3,784,957) (1,943,848) (1,445,610)

Current Tax (Expense) / Income 30 (3,442,062) (3,621,386) (1,861,080) (1,364,209)

Deferred Tax (Expense) / Income 30 319,020 (163,571) (82,768) (81,401)

NET PROFIT / (LOSS) FOR THE

PERIOD 9,821,993 16,840,717 5,330,276 5,312,009

Distribution of Profit / (Loss) For The

Period

Minority Interest 22.9 (249,111) - 176,051 -

Parent Company's Share 31 10,071,104 16,840,717 5,154,225 5,312,009

Earnings Per Share 31 0.16 0.34 0.09 0.11


(*) Causes and effects of restatement are explained in Note 2a.


AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE PERIODS ENDED AT 30 JUNE 2013 AND 2012 (Currency - Turkish Lira ‘TRY’ unless expressed otherwise.)

Restated

Restated

Current

Period Prior Period

Current

Period Prior Period

Reviewed Reviewed Reviewed Reviewed

Footnote

References

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

PROFIT / (LOSS) FOR THE PERIOD 9,821,993 16,840,717 5,330,276 5,312,009

OTHER COMPREHENSIVE INCOME / (LOSS)

Not to Be Reclassified to Profit or Loss (1,260,898) (652,384) (604,070) (451,082)

Changes In Reveluation Of Tangible

Fixed Assets 15 – 30

(1,540,784) (798,614) (770,253) (533,504)

Actuarial Gain / Loss from Retirement Pay Provision (15,352) 13,137 17,058 (15,347)

Taxes In Other Comprehensive Income Not to Be

Classfied on Profit / (Loss)

-Deferred Expenses/ Income of the

Period 30

295,238 133,093 149,125 97,769

OTHER COMPREHENSIVE INCOME /

(EXPENCE) (1,260,898) (652,384) (604,070) (451,082)

TOTAL COMPREHENSIVE INCOME/ EXPENCE 8,561,095 16,188,333 4,726,206 4,860,927

Distribution of Total Comprehensive

Income/ (Expense)

Minority Interest (249,731) - 176,693 -

Parent Company's share’s 8,810,826 16,188,333 4,549,513 4,860,927


(*)Causes and effects of restatement are explained in Note 2a.


AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE PERIODS ENDED AT 30 JUNE 2013 AND 2012 (Currency - Turkish Lira ‘TRY’ unless expressed otherwise,)

Accumulated Other

Comprehensive Income

Not To Be Reclassified on

Profit/(Loss)

Accumulated Profit /

(Loss)

Footnote

References

Paid In

Capital

Inflation

Adjustments

Of

Shareholders'

Equity

Shares

Premiums/

Discounts

Actuarial

Gain/ Loss

from the

Retirement

Pay

Provision

Changes in

Revaluation

of Tangible

Fixed Assets

Effect Of

Business

Mergers

Subject To

Joint

Control and

Joint

Ventures

Restricted

Reserves

Retained

Earnings /

(Losses)

Net Profit/

(Loss) For

The Period

Parent

Company's

Equity

Minority

Interest

Total

Shareholder's

Equity

Balance at 31 December 2011

46,878,214 746,913 - (154,357) 54,717,554 - 436,059 1,930,919 2,472,145 107,027,447 - 107,027,447

Transferred from retained profit

- - - - - - 680,563 1,791,582 (2,472,145) - - -

Capital increase

- Cash

3,121,786 - - - - - - - - 3,121,786 - 3,121,786

Total comprehrensive income / loss, net

- - - 10,509 (662,893) - - - 16,840,717 16,188,333 - 16,188,333

Balance at 30 June 2012

50,000,000 746,913 - (143,848) 54,054,661 1,116,622 3,722,501 16,840,717 126,337,566 - 126,337,566

Balance at 31 December 2012

50,000,000 746,913 - (178,940) 39,380,414 1,116,622 3,722,501 41,965,079 136,752,589 - 136,752,589

Capital Increase

- Cash 22.1 10,000,000 - - - - - - - 10,000,000 - 10,000,000

Premium in excess of par 22.3 - - 31,399,971

- - - - - 31,399,971 - 31,399,971

Transferred from retained profit

- - - - - 1,856,229 40,108,850 (41,965,079) - - -

Effect of business mergers subject to joint control and joint ventures 22.5 - - - - (2,390,557) - - - (2,390,557) 153,190 (2,237,367)

Total comprehrensive income / loss, net

- - -

(11,662) (1,248,616) - - - 10,071,104 8,810,826 (249,731) 8,561,095

Balance at 30 June 2013 60,000,000 746,913 31,399,971 (190,602) 38,131,798 (2,390,557) 2,972,851 43,831,351 10,071,104 184,572,829 (96,541) 184,476,288



AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED AT 30 JUNE 2013 AND 2012 (Currency - Turkish Lira (TRY) unless expressed otherwise.)

Current Period Prior Period

Reviewed Reviewed

Footnote

References

01.01.-

30.06.2013

01.01.-

30.06.2012

A. CASH FLOW FROM OPERATING ACTIVITIES (27,771,370) 32,749,077

Parent Company’s Profit / (Loss) of the period, net 10,071,104 16,840,717

Adjustments to Reconcile Net Profit / (Loss) for the Period

Tangible Fixed Assets Amortization 15 4,073,775 3,645,018

İntagible Fixed Assets Depreciation 16 1,042,341 1,016,212

Adjustment to retirement pay provision 20 121,324 54,252

Adjustment to Interest accruals of bank borrowings 9 229,177 334,868

Unrealized Exchange Difference Income / (Expenses), Net 2,934,656 223,918

Adjustment to Provisions for Lawsuits 18 (93,840) 2,927,449

Adjustment to Diminution in Value of Inventories 13 250,313 -

Adjustment to Provision for Doubtful Receivables 10 – 25.1 200,316 1,892,288

Adjustment to Unearned Interest on Receivables 10 - 26 2,620,176 2,777,268

Adjustment to Unearned Interest on Notes Payables 10 - 26 (1,827,373) (3,251,420)

Deferred Tax Effect of Business Merger Subject to Joint Control 30 (1,163,965) -

Adjustment to deferred tax 30 (319,020) 163,571

Adjustment to Actuarial Gain / Loss from Retirement Pay Provision

of Parent’s Company (11,662) 10,509

Deffered Taxes Accounted for Under Equity 30 (3,070) 2,628

Changes in Operating Assets and Liabilities

Changes in Trade Receivables 10 (24,888,074) (9,887,689)

Changes in Other Receivables 11 (11,700,775) 1,368,398

Changes in Inventories 13 (13,812,203) (8,982,159)

Changes in Other Current Assets 21 (3,679,806) (825,715)

Changes in Trade Payables 10 2,418,514 26,254,510

Changes in Other Payables 11 7,481,990 (3,522,506)

Change in Non-Current Assets Held for Sale 29 (3,296,250) -

Cash Flow From Operating Activities

Taxes Paid 30 1,580,982 1,706,960

B.CASH FLOW FROM INVESTING ACTIVITIES (20,675,407) (1,733,893)

Cash from Purchases of Tangible and İntangible Non-current Assets 15 - 16 (17,363,064) (1,733,893)

Cash from Sales of Tangible and İntangible Non-current Assets 15 - 16 10,264 -

Effect of Business Mergers Subject toJoint Control and Joint

Ventures 22.5 (2,390,557) -

Change in Minority Interests 22.9 (96,541) -

Additions from Acquisition of Subsidiary 15 - 16 (835,509) -

C.CASH FLOW FROM FINANCE ACTIVITIES 47,347,537 (31,150,191)

Capital Increase 22.1 10,000,000 3,121,786

Premium/Discount in Excess of Par 22.3 31,399,971 -

Changes in Borrowings 9 5,947,566 (34,271,977)

NET INCREASE/DECREASE OF CASH AND CASH EQUIVALENTS

(A+B+C) (1,099,240) (135,007)

D. CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE

PERIOD

1,662,350 881,903

CASH AND CASH EQUIVALENT AT THE AND OF THE PERIOD (A+B+C)

563,110 746,896



AND IT’S SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AT 30 JUNE 2013 (Currency - Turkish Lira ‗TRY‘ unless expressed otherwise.)

-1-

NOTE 1 – ORGANIZATION AND NATURE OF ACTIVITIES

For the purpose of the consolidated financial statements Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret

Anonim Şirketi (―Parent Company‖) and its subsidiary are referred as ―Group‖.

The summarized information of entities which are consolidated with ―complete consolidation method‖ is

comprised of the following;

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi (―Parent Company‖ or ―Company‖) was

established in the year of 2000 in Gaziantep, Turkey with the title of Naksan Kimya Sanayi ve Ticaret A.Ş.

which was changed and registered to current name at 31 December 2007. The Company began its activities with

production of fabric canvas, fabric irrigation hoses, polyester canvas, woven sacks, and lamination and

veneering, then changed its area of activities to production of carpets (PP, acrylic, wool) and yarn with BCF

technology in the year 2005 and in the same year, the Company started the investment to establish a new factory

to produce machine carpet. The Company registered ―Royal Halı‖ as a carpet trademark from Turkish Patent

Institute and entered into the domestic and foreign market. As of 2007 Company obtained the rights to use

trademark ―Pierre Cardin‖ in carpet sector and started carpet production activities under this trade mark. In

2010, company rented Pierre Cardin‘s trademark rights to use in the carpet industry for 10 years. In addition

to these two brands, as of 31 December 2010, the Company acquired ―Atlas Halı‖ brand.

As of 30 June 2013 there are 18 main dealers of the Company, the majority of domestic carpet sales are

realized through these dealers. Also, as of 30 June 2013, the Company has 6 showrooms, 2 located in

Gaziantep, 2 located in Hatay, 1 located in Şanlıurfa and 1 in İkitelli/Istanbul, owned and operated by the

Company itself. No dealer system exists in BCF yarn sale.

For the period ended in 30 June 2013, 642 average personnel were employed by the company (01 January - 31

December 2012: 570).

The company is registered to the Capital Market Board and on the date of 03 May 2013, whose shares are

offered to the public at the Borsa İstanbul Anonim Şirketi (by the old name ―ISE‖), in the primary market. As

of 30 June 2013, 28.75% of shares, which represent the company‘s capital, are traded at the Borsa İstanbul

Anonim Şirketi (by the old name ―ISE‖). (31 December 2012: none) As of 30 June 2013 and 31 December

2012, the company‘s partnership structure as, was presented in note 22.1. The company‘s main shareholder is

Naksan Holding A.Ş. and ultimate shareholders are Nakıboğlu family.

As of report date, registered addresses of the Company are as follows;

Carpet Factory

4. Organize Sanayi Bölgesi

83402 No‘lu Cadde No: 3

Başpınar / Gaziantep / Turkey

BCF Yarn Factory

4. Organize Sanayi Bölgesi

83118 No‘lu Cadde No: 6

Başpınar / Gaziantep / Turkey





-2-

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi (‗The company‘ or ‗Atlas Halı‘) was

established on 14 September 2011 in Istanbul / Turkey. The Company is engaged in producing and selling of

machine carpets.

Atlas Halı makes its sales to final consumer by direct dealers channel without using regional dealers.

For the period ended in 30 June 2013, 29 average personnel were employed by the company (01 January - 31

December 2012: 29).

As of 30 June 2013 and 31 December 2012, Company‘s capital structure is as following;

30 June 2013 31 December 2012

Shareholders Ratio

Amount

(TRY) Ratio

Amount

(TRY)

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret

Anonim Şirketi 51.00% 2,550,000 - -

Naksan Holding Anonim Şirketi 19.00% 950,000 70.00% 3,500,000

Osman Nakıboğlu 11.40% 570,000 11.40% 570,000

Cahit Nakıboğlu 10.80% 540,000 10.80% 540,000

Bahaeddin Nakıboğlu 3.60% 180,000 3.60% 180,000

Cihan Dağcı 2.50% 125,000 2.50% 125,000

Mehmet Hilmi Nakıboğlu 1.20% 60,000 1.20% 60,000

Taner Nakıboğlu 0.50% 25,000 0.50% 25,000

Total 100.00% 5,000,000 100.00% 5,000,000

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi has bought 51% of the shares of Atlas

Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi from the company‘s main partner Naksan Holding

Anonim Şirketi in 29 January 2013.

As of report date, registered address of the Company is as follows;

Dünya Ticaret Merkezi

A1 Blok 17. Kat

Yeşilköy / İstanbul / Turkey





-3-

NOTE 2 – BASIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

2. a Basis of Presentation

Compatibility Statement

Consolidated companies prepare their statutory financial statements in accordance with the principles of CMB,

Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of

Finance and presents in Turkish Liras (TRY). The financial statements of the Company have been prepared in

accordance with Communiqué XI, No: 29 ―Accounting Standards in Capital Markets‖ published by the Capital

Markets Board (―CMB‖), the necessary adjustments and reclassifications made for the fair presentation in

accordance with Accounting Standards by CMB.

The Preparation of Financial Statements

The interim condensed consolidated financial statements and disclosures have been prepared in accordance

with the communiqué numbered II-14.1 ―Communique on the Principles of Financial Reporting In Capital

Markets‖(the Communique‖) announced by the Capital Markets Board (―CMB‖)(hereinafter will be referred

to as ―the CMB Reporting Standards‖) on 13 June 2013 which is published on Official Gazette numbered

28676, in accordance with article fifth of the Related Communique, companies should apply Turkish

Accounting Standards/Turkish Financial Reporting Standards and interpretations regarding these standards as

adopted by the Public Oversight Accounting and Auditing Standards Authority of Turkey (―POA‖).

Financial Statements Correction in High Inflation Period

The CMB has announced that, effective from 1 January 2005, the application of inflation accounting is no longer

required for companies operating in Turkey and preparing their financial statements in accordance with CMB

Accounting Standards. Therefore Group was abolished inflation accounting application for 1 January 2005.

Currency

The financial statements and the prior period financial statements for comparison purpose, in the accompanying

statements are prepared in terms of Turkish Lira (TRY).

Approval of Consolidated Financial Statements

Consolidated financial statements of the Group are approved by the Board of Directors and granted authority

to publish on 26 August 2013. With no intention, the Board of Directors and some regulative agencies have

the right to change the financial statements that were prepared according to legal regulations after they have

been published.





-4-

Consolidation

The companies are subject to ―Complete Consolidation Method‖ if directly or indirectly 50% or more than

50% of their shares or over 50% of their voting rights or the controlling rights regarding companies‘

operations are belonging to the Parent Company. Parent Company has controlling rights if it is able to govern

the financial and operating policies of an enterprise so as to benefit from its activities. The companies which

have continuous relationship on management and power to govern Parent Company‘s policies and/or which

have direct or indirect capital and management relationship or which have voting share of Parent Company

between the rates 20-50% are accounted by using equity pick-up method.

Complete Consolidation Method

The principles of consolidation followed in the preparation of the accompanying financial statements are as

follows:

- The financial statements of the consolidated subsidiaries have been equipped according to the accounting

principles of the Parent Company.

- The share of the Parent Company in the shareholders equity of subsidiaries is eliminated from the

financial of subsidiaries these are adjusted according to the accounting principles of financials of the

Parent Company.

- All significant intercompany transactions and balances between the Parent Company and the subsidiaries

have been comparatively eliminated.

- The minority part of shareholders‘ equity including paid capital of the companies subject to consolidation

is classified as ―Minority Interest‖ in accompanying financial statement.

- The balance sheet and income statement of the subsidiaries are consolidated on a line by line basis, and

the carrying value of the investment held by the Parent Company is eliminated against the related

shareholders‘ equity accounts.

- The income statements of the Parent Company and the subsidiaries are consolidated a line by line basis

and the transaction between companies are eliminated mutually. Consolidation of income statements of

subsidiaries held in an audit period are based on the investment date and the items after the holding date

are included.

The portion of the third parties other than consolidated companies in the net income or losses of the

subsidiaries are classified as ―Minority Interest‖ in the income statements.





-5-

As of 30 June 2013, the company that are subject to ―Complete Consolidation Method‖ if directly or

indirectly 50% or more than 50% of their shares or over 50% of their voting rights or the controlling rights

regarding companies‘ operations are belonging to the Parent Company are as below;

30 June 2013

Ownership of the Parent

Company through the

subsidiary Minority

Interest

Subsidiaries (Direct)

(Direct+

Indirect) (Ratio)

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi 51.00% 51.00% 49.00%

As of 31 December 2012, Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi did not have

any subsidiaries, as a result of this, accompanying financial statements which are dated 31 December 2012 are

not consolidated.

Adoption of New and Revised International Financing Reporting Standards

Group has applied the new and revised standards and interpretations of the International Accounting

Standards Committee (IASC) published by International Financial Reporting Interpretations Committee

(IFRIC) of IASC for the interim financial statements dated 30 June 2013 and 31 December 2012, for the

related to its business activities, in the current fiscal period.

New standards, amendments and explanations for the dated 1 January 2013 year ended financial statements:

IFRS 9 - “Financial Instruments, Classification and Measurement”; In November 2009, the first part of IFRS

9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately replace

IAS 39 Financial Instruments: Recognition and Measurement. The standard requires an entity to classify its

financial assets on the basis of the entity‘s business model for managing the financial assets and the

contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as

either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or

after 1 January 2013.

IFRS 9 – “Financial Instruments, Classification and Disclosure”; as amended in December 2011, the new

standard is effective for annual periods beginning on or after January 1, 2015. Phase 1 of this new IFRS

introduces new requirements for classifying and measuring financial instruments. The amendments made to

IFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair

value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability

attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. This

standard has not yet been endorsed by the EU.





-6-

IFRS 10 – “Consolidated Financial Statements” standard is effective for annual periods beginning on or after

1 January 2013 and is applied on a modified retrospective basis. This new Standard may be adopted early, but

IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities should be also adopted

early. IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses

the accounting for consolidated financial statements. A new definition of control is introduced, which is used

to determine which entities are consolidated. This is a principle based standard and require preparers of

financial statements to exercise significant judgment. This standard has not yet been endorsed by the EU.

IFRS 11 - ―Joint Arrangements‖ standard is effective for annual periods beginning on or after 1 January 2013

and is applied on a modified retrospective basis. This new Standard may be adopted early, but IFRS 10

Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities should be also

adopted early. The standard describes the accounting for joint ventures and joint operations with joint control.

Among other changes introduced, under the new standard, proportionate consolidation is not permitted for

joint ventures.

IFRS 12 - ―Disclosure of Interests in Other Entities‖ standard is effective for annual periods beginning on or

after 1 January 2013 and is applied on a modified retrospective basis. This new Standard may be adopted

early, but IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements should be also

adopted early. IFRS 12 includes all of the disclosures that were previously in IAS 27 Consolidated and

Separate Financial Statements related to consolidated financial statements, as well as all of the disclosures that

were previously included in IAS 31 Interests in Joint Ventures and IAS 28 Investment in Associates. These

disclosures relate to an entity‗s interests in subsidiaries, joint arrangements, associates and structured entities.

Under the new standard the Group will provide more comprehensive disclosures for interests in other entities.

Revised IFRS 13 - ―Fair Value Measurement‖ standard provides guidance on how to measure fair value under

IFRS but does not change when an entity is required to use fair value. It is a single source of guidance under

IFRS for all fair value measurements. The new standard also brings new disclosure requirements for fair value

measurements. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 and will be

adopted prospectively. Early application is permitted. The new disclosures are only required for periods

beginning after IFRS 13 is adopted — that is, comparative disclosures for prior periods are not required.

IAS 27 - ―Consolidated and Separate Financial Statements‖ As a consequential amendment to IFRS 10, the

IASB also amended IAS 27, which is now limited to accounting for subsidiaries, jointly controlled entities,

and associates in separate financial statements. Transitional requirement of this amendment is similar to IFRS

10. On or after January 1, 2013 shall apply to annual periods beginning on or after that date.

IAS 28 – “Investments in Associates and Joint Ventures (Amended)” - As a consequential amendment to IFRS

11, the IASB also amended IAS 28, which has been renamed IAS 28 Investments in Associates and Joint

Ventures, to describe the application of the equity method to investments in joint ventures in addition to

associates. Transitional requirement of this amendment is similar to IFRS 11. This standard has not yet been

endorsed by the EU.





-7-

IAS 19 - ―Employee Benefits‖ Amended standard is effective for annual periods beginning on or after January

1, 2013, with earlier application permitted. With very few exceptions retrospective application is required.

Numerous changes or clarifications are made under the amended standard. Among there numerous

amendments, the most important changes are removing the corridor mechanism and making the distinction

between short-term and other long-term employee benefits based on expected timing of settlement rather than

employee entitlement.

IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amended)

The amendment alters the definition of a financial liability in IAS 32 to enable entities to classify rights issues

and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro

rata to all of the existing owners of the same class of an entity‗s non-derivative equity instruments, to acquire

a fixed number of the entity‗s own equity instruments for a fixed amount in any currency. The amendments

are effective for annual periods beginning on or after 1 January 2014 and will be adopted retrospectively.

IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amended)

New disclosures would provide users of financial statements with information that is useful in i) evaluating

the effect or potential effect of netting arrangements on an entity‗s financial position and ii) analyzing and

comparing financial statements prepared in accordance with IFRS and other generally accepted accounting

standards. This standard has not yet been endorsed by the EU. The amendments are to be retrospectively

applied for annual periods beginning on or after 1 January 2013 and interim periods within those annual

periods. The amendment affects disclosures only.

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

The Interpretation is effective for annual periods beginning on or after 1 January 2013 with earlier application

permitted. Entities will be required to apply its requirements for production phase stripping costs incurred

from the start of the earliest comparative period presented. The Interpretation clarifies when production

stripping should lead to the recognition of an asset and how that asset should be measured, both initially and

in subsequent periods. This standard has not yet been endorsed by the EU.

The Group evaluates possible effects of above standards and changes on their financial position and

performance.

Offsetting

Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet when

there is a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a basis,

or realize the asset and settle the liability simultaneously.

Going Concern

The accompanying consolidated financial statements prepared on the principle that the Group will be

obtaining benefits from their assets and meet their liabilities within usual scales for the next year.





-8-

Comparative Information and Previous Period Financial Statements Adjustments

The condensed interim consolidated financial statements of the Group include comparative financial

information to enable the determination of the financial position and performance. Comparative figures are

reclassified, where necessary, to confirm to changes in presentation in the current period.

As part of the amendment effective as of 1 January 2013 in ―Employee Benefits‖ of the IAS 19, regarding the

severance pay liability which is recognized under employee termination benefits of the Group, the total

actuarial gain/(loss) (includes deferred tax effect), is shown in statements of changes in equity ―actuarial gain

(loss) from retirement pay provision‖. With the changes in the standard, the Group, for the periods ended at 31

December 2012 and 30 June 2012, prepared their financial statements same way and profit / (loss) from the

period ended at 30 June 2012 amounting to TRY 10,509 was classified under equity ―Accumulated profit and

losses‖ In the balance sheet for the period ended at 31 December 2012 amounting to TRY 24,583 in ―Net

profit / (loss) for the period‖ classified to ―Accumulated profit and loss‖ in equity.

Pursuant to the decree taken in the CMB‘s meeting dated 07 June 2013 and numbered 20/670, for capital

market board institutions within the scope of the Communique on Principles Regarding Financial Reporting in

the Capital Market, financial statement models and user guide have been published, effective as of the interim

periods ended after 31 March 2013.Various classifications were made in the Group‘s statement of financial

position pursuant to these formats which have taken effect.

The classifications made in the statement of consolidated financial position of the Group as of 31 December

2012 and 2011 are as follows

- As of 31 December 2012 and 2011, TRY 4,708,498 TL and TRY 489,467, which are ―Prepaid taxes

and funds‖, as shown in the other current assets, are classified in balance sheet as a separate account

within the scope of the ‗Assets relevant to current period taxes account ‘.

- As of 31 December 2012 and 2011, TRY 1,302,803 and TRY 1,339,586 which are ―Prepaid expenses –

short term‖, as shown in the other current assets, are classified in balance sheet as a separate account

within the scope of the ‗Prepaid expenses account‘.

- As of 31 December 2012 and 2011, TRY 108,504 and TRY 269,956 which are ―Order advances

given‖, as shown in the other current assets, are classified in balance sheet in Prepaid expenses.

- As of 31 December 2012 and 2011, TRY 983,083 and TRY 769,765 which are ―Advances given for

the purchases of tangible fixed assets‖, as shown in the other non-current assets, are classified in

balance sheet in ―Prepaid expense-long term account‖.

- As of 31 December 2012, TRY 725 which is ―Advances given for the business purpose‖, as shown in

the other current assets, is classified in balance sheet in ―prepaid expenses account‖.

- As of 31 December 2012 and 2011, TRY 843,025 and TRY 1,286,102 which are ―Prepaid expenses-

long term‖, as shown in the other non-current assests, are classified in balance sheet as a separate

account within the scope of the ―Prepaid ezpenses-long term account‖.

- As of 31 December 2012 and 2011, TRY 9,619,443 and TRY 52,747,738 which are ―Current

installement of long term financial‖, as shown in the current liabilities, are classified in balance sheet as

a separate account within the scope of current installement of long term financial.

http://tureng.com/search/current%20portion%20of%20amounts%20payable%20after%20one%20year

http://tureng.com/search/current%20portion%20of%20amounts%20payable%20after%20one%20year





-9-

- As of 31 December 2012, TRY 39,364 which is ― Current financial lease payables‖ as shown on the

current liabilities, is classified in balance sheet as a separate account at the scope of the ‖current

financial lease payables account‖.

- As of 31 December 2012 and 2011, TRY 413,876 and TRY 286,177 which are ―Due to personnel‖, as

shown in the other payables, are classified in balance sheet in ―employee benefit obligations account‖.

- As of 31 December 2012 and 2011, TRY 224,552 and TRY 162,771 which are ―Social security

premiums payable‖, as shown in the other payables, are classified in balance sheet in ―Employee

benefit obligations account‖.

- As of 31 December 2012 and 2011, TRY 361,642 and TRY 172,730 which are ―expense accruals due

to contracts‖, as shown in the provision for payable, are classified in balance sheet in ―Trade payables

account‖.

- As of 31 December 2012 and 2011, TRY 10,388,841 and TRY 22,178,199 which are ―Advances

received‖, as shown in the other payables account, are classified in balance sheet as a separate account

within the scope of the ―Deferred income‖.

- As of 31 December 2012 and 2011, TRY 1,281,250 and TRY 1,746,313 which are ―Advances

received‖ as shown on the other non-current liabilities, are classified in balance sheet as a separate

account at the scope of ―Deffered incomes- long term account‖.

Reclassifications to Group's income statement at 30 June 2012 are as follows and reclassification has no effect

on income / (loss);

- In the income statement for the period ended 30 June 2012, TRY 7,354,401 which are ―Foreign

exchange income from commercial activities‖, as shown in the financial income, are classified in

income statement in ―Other real operating expenses‖.

- In the income statement for the period ended 30 June 2012, TRY 7,246,236 which are ―Foreign

exchange expenses from commercial activities‖, as shown in the financial expense, are classified in

income statement in ―Other real operating expenses‖.

- In the income statement for the period ended 30 June 2012, TRY 3,251,420 which are" Discount

income‖, as shown in the financial income, are classified in income statement in ―Other real operating

income‖.

- In the income statement for the period ended 30 June 2012, TRY 2,777,268 which are ―Discount

expense‖, as shown in the financial expense, are classified in income statement in ―Other real operating

expenses‖.

- At the profit and loss table belonging to the interim period ended 30 June 2012, ―Interest income from

non-trade receivables‖ ,which are shown on the Finance income account group, at the amount of TRY

401,378 is classified in the account of ―Income from investment activities‖ at the income statement.

- At the profit and loss table belonging to the interim period ended 30 June 2012, ―Interest expenses from

non-trade liabilities‖ which are shown on the financial expense account group, at the amount of TRY

136,280 is classified in the account of ―Expenses from investment activities‖ at the income statement.

- At the profit and loss table belonging to the interim period ended 30 June 2012, ―Late interest income

from commercial receivables‖ which are shown on the Financial income account group, at the amount

of TRY 19,441 is classified in the account of ―Other operating income‖ at the income statement.

http://tureng.com/search/other%20payables

http://tureng.com/search/other%20payables





-10-

2. b Changes in Accounting Policies

A company only could change it s accounting policy under following circumstances;

If a standard or interpretation makes it necessary or

If the change make effect of operations or incidents on financial position and performance or cash flows more

appropriate and reliable.

Financial statements have to be comparable to see trends in financial position of companies, performance and

cash flows for user of financial statements. This is why, if the change is not granting one of above conditions,

each interim and fiscal periods has to be applied same accounting policy.

Changes in Accounting Estimates and Errors

The accompanying consolidated financial statements necessitate that some predictions about income and

expenses regarding possible assets and liabilities in the financial statements prepared by the Group management

to be compatible with statements required by Capital Market Board. Realized amounts can differ from the

predictions. These predictions are observed regularly and reported periodically in income statements. Changes in

accounting estimates and errors explained in title of ―Comparative Information and Previous Financial

Statements Adjustments‖ which is explained below.

Comments those would have significant effect on balances reflected in the consolidated financial statements

and important expectations and valuations considering present or future expectation as of report date, are as

following:

Provision for doubtful receivables

Provision for doubtful receivables reflect the future loss that the Group anticipates to incur from the trade

receivables as of the balance sheet date which is subject to collection risk considering the current economical

conditions. During the impairment test for the receivables, the debtors are assessed with their prior year

performances, their credit risk in the current market, their performance after the balance sheet date up to the

issuing date of the financial statements; and also the renegotiation conditions with these debtors are considered.

The provision for doubtful receivables is presented in Note 10.

Inventory impairment loss provision

During the assessment of the provision for inventory the following are considered; analyzing the inventories

physically and historically, considering the employment and usefulness of the inventories respecting to the

technical personnel view. Sales prices listed, average discount rates given for sale and expected cost incurred to

sell are used to determine the net realizable value of the inventories. As a result of this, the provision for

inventories with the net realizable values below the costs and the slow moving inventories are presented. The

provision for impairment loss provision is presented in Note 13.





-11-

Useful lifetime of tangible and intangible assets

Group reserves provision for depreciation regarding to footnote 2.c that refers to useful lifetime on fixed

assets. Information about useful lifetime is described in footnote 2.c.

Provision for lawsuits

While setting provision for lawsuits, it has considered probability to lose lawsuit, then the consequences of

loosing case by the legal advisor of the Group. Details of the lawsuits provisions are in Note 18 based on the

estimation by utilizing information given by Group Management.

Severance pay provision

Severance Pay Provision is calculated with actuarial expectation based on assumptions like discount rates, salary

increase in the future and probability to quit the job. This planning covers long term concerns. Hence

assumptions involve vital uncertainty. Provisions for employee benefits are given in detail in Note 20.

Deferred Tax

The Group recognizes deferred tax on the temporary timing differences between the carrying amounts of assets

and liabilities in the financial statements prepared in accordance with IFRS and statutory financial statements

which is used in the computation of taxable profit. The related differences are generally due to the timing

difference of the tax base of some income and expense items between statutory and IFRS financial statements.

The Group has deferred tax assets resulting from tax loss carry-forwards and deductible temporary differences,

which could reduce taxable income in the future periods. All or partial amounts of the realizable deferred tax

assets are estimated in current circumstances. The main factors which are considered include future earnings

potential; cumulative losses in recent years; history of loss carry-forwards and other tax assets expiring, the

carry-forward period associated with the deferred tax assets, future reversals of existing taxable temporary

differences that would, if necessary, be implemented, and the nature of the income that can be used to realize the

deferred tax asset. As a result of the revaluation, as of 30 June 2013, temporary differences due to tax incentives

can be foreseen and the fraction falls in continuity of tax incentives within the context of tax legislations, can be

benefited from and is to be tax assets and accounted. As of balance sheet date, the details regarding deferred tax

calculations are stated in Note 30.





-12-

2. c Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalent values contain cash on hand, bank deposits and high liquidity investments. Cash and

cash equivalents are showed with obtaining costs and the total of accrued interests.

Financial Investments

Initial measurements of financial asset and financial liabilities

When a financial asset or financial liability is recognized initially, an entity shall measure it at its fair value

plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction

costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

When an entity uses settlement date accounting for an asset that is subsequently measured at cost or amortized

cost, the asset is recognized initially at its fair value on the trade date.

Subsequent measurement of financial assets

After initial recognition, an entity shall measure financial assets, including derivatives that are assets, at their

fair values, without any deduction for transaction cost it may incur on sale or other disposal, except for the

following financial assets:

(a) Loan and receivables which shall be measured at amortized cost using the effective interest method;

(b) Held-to-maturity investments which shall be measured at amortized cost using the effective interest

method, and

(c) Investments in equity instruments that do not have a quoted market price in an active market and whose

fair value cannot be reliably measured and derivatives that is linked to and must be settled by delivery of

such unquoted equity instruments which shall be measured at cost.

A financial asset of financial liability at fair value difference through profit or loss:

It is classified as tangible assets hold for future sale. A financial asset or financial liability is classified as

tangible assets hold for future sale if it is:

(a) Acquired or incurred principally for the purpose of selling or repurchasing it in the near term,

(b) Part of a portfolio of identified financial instruments that are managed together and for which there is

evidence of a recent actual pattern of short-term profit making; or

(c) A derivative (except for a derivative that is a financial guarantee contract or a designated and effective

hedging instrument).





-13-

Held-to maturity investments

Non derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the

positive intention and ability to hold to maturity.

(a) Those that the entity upon initial recognition designates as at fair value through profit or loss;

(b) Those that the entity designates as available for sale; and

(c) Those that meet the definition of loans and receivables.

Available-for-sale financial assets

Non-derivative financial assets that are designated as available for sale or are not classified as loans and

receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Financial assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that

is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is

linked to and must be settled by delivery of such unquoted equity instrument, the amount of the impairment

loss is measured as the difference between the carrying amount of the financial asset and the present value of

estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such

impairment losses shall not be reversed.

Shares

If shares are quoted in Borsa İstanbul Anonim Şirketi, then these shares are revalued with closing price as of

balance sheet date. If shares are not quoted, then these shares are revalued with acquirement price as of

balance sheet date. Funds given against financial assets reverse repo are reflected as reverse repo receivables

under marketable securities in the accompanying consolidated financial statements. The portion of the

difference between purchase and sale back price by these reverse repo agreements for the interim period is

calculated by ―internal discount rate‖ as discounted income and it is accounted by adding to cost of reverse

repo.

Marketable securities

Financial assets in which Parent Company has voting right below 20%, or over 20% which Parent Company

does not exercise a significant influence, and subsidiaries or joint venture, which are not included in

consolidation that they are immaterial or which are immaterial, that do not have a quoted market price in

active markets and whose fair value cannot be measured reliably are carried at cost less any provision for

diminution in value.

Financial Borrowings

Financial borrowings are recognized initially at the proceeds received, net of transaction costs incurred.

Borrowings are subsequently stated at amortized cost using the effective yield method; any difference

between proceeds, net of transaction costs, and the redemption value is recognized in the income statement

over the borrowing period. Borrowing costs are charged to income statement when they incur and reclassed to

bank loans.





-14-

Trade Receivables and Payables

The trade receivables and payables derived from providing services or selling goods by Group and purchasing

goods or receiving services are clarified with deferred financial income and expense in the accompanying

financial statements. Post clarification, trade receivables and trade payables are calculated from the values of

following the record of the original invoice values, by rediscounting with effective interest rate method. Short

term receivables without designated interest rate are reflected the invoice values in case the effective interest

rate effect is insignificant.

Provision for Doubtful Receivables

Group sets provisions for doubtful receivable when it is realized uncollectible due to objective findings. Amount

of this provision is the difference of registered and collectible amounts. All cash flow including the collectible

sum amount from guarantee and assurance is discounted on the base of the effective interest rate of trade

receivable occurred.

In case of collecting doubtful receivable that is provided, the collected amount is deducted from the provision for

doubtful receivable and in case of a remaining balance; the balance is added to other operating income.

Inventories

Inventories, valued at the lower of cost or net realizable value. Cost is determined by the weighted average

cost method. Net realizable value is obtained, according to the subscription of estimated completion cost and

estimated costs which are installed in order to realize the sale from estimated selling price, in ordinary trade

activity.

The allowance for decrease in value of inventories degrade inventories to net realizable value and losses about

the inventories are recognized as expense during the formation of degrade and losses. Allowance for decrease

in value of inventories reversed because of the increase of realizable value, recognized to reduce the accrued

selling cost in the reverse period. As of every financial statement period, net realizable value is reviewed once

again. The provision for losses is reversed in the case of either the conditions causing to degrade the

inventories‘ net realizable value lose validity or changing economic conditions forming an increase in net

realizable value is proved (reversed amount is limited with the previous impairment amount).

Tangible Fixed Assets

Tangible fixed assets (except lands, buildings, machineries, plants and equipments) are carried at cost, restated

by deduction of the yearly accumulated depreciation. Depreciation is provided on the acquired values of

property, plant and equipment on a straight-line method starting from the acquirement date. Land is

considered as limitless useful life, so it is not subject to depreciation.





-15-

As of 31 December 2012, lands, buildings and machineries, plants and equipments of the Group are revalued

at fair value and reflected in the consolidated financial statements according to the Expert Appraisal Reports

which are prepared by Elit Gayrimenkul Değerleme A.Ş. that is approved by the Capital Market Board. As of

30 June 2013, there is not a new Expert Appraisal Report for Group‘s lands, buildings and machineries, plants

and equipment. For this reason, lands, buildings and machineries, plants and equipments mentioned in the

Expert Appraisal Report are shown in the accompanying consolidated financial statements by reducing

impairment between balance sheet date and appraisal report date. Impairment was calculated with

consideration of mentioned fixed asset‘s remaining useful life.

The revaluation frequency depends on the differences of the realistic values of tangible fixed assets.

If a net book value of an asset increases during the revaluation, this increase will be recognized at other

comprehensive income and allocated under revaluation value increase directly in the owners' equity account.

However a revaluation value increase can only be recognized as the same amount of value decrease occurred

from profit or loss for the same asset.

If a net book value of an asset decreases during the revaluation, this decrease recognized as expense. However

this decrease can only be recognized as much as all kinds of credit balance about this asset in the revaluation

surplus. The subjected decrease recognized in other comprehensive income, decreases the amount

accumulated in owners‘ equity under revaluation surplus.

The depreciation rates for tangible fixed assets, which approximate the useful economic lives of these assets,

are as follows:

Useful life

Infrastructure and land improvements 25 years

Buildings 50 years

Machinery, plants and equipments 12 years

Motor vehicles 6 years

Furniture and fixtures 10 years

Leasehold improvements Rent period Intangible Fixed Assets Intangible fixed assets comprise of rights and they are recorded at acquisition cost. Intangible fixed assets are

amortized on a straight-line method with prorate basis over period of maximum 10 years from the date of

acquisition.

Financial Leases

Group acquired assets under finance lease agreements and capitalized at the inception of the lease starting from

acquired date. Payables to lease are pursued under financial leasing liability in balance sheet. Calculation of

minimum leasing payment is to find out current market value as the valid proportion is calculated practically in

financial leasing process then it is, otherwise proportion of interest rate of loan is used as discount factor.

Expenses of asset acquisition through financial leasing are included in costs. The liability from financial leasing

is decomposed into interest rate and the main loan. Expenses of interest rate are calculated with the fixed interest

rate and are issued in related periods.





-16-

Assets Held For Sale

The Group measures assets held for sale at the lower of its carrying amount and fair value less costs to sell.

Assets held for sale are not depreciated. Just before the first classification of related asset (or the group of

assets held for sale) as asset held for sale, the book value of the asset (or all of the assets within the group and

debts related to group) is measured within the context of related IFRS.

The Group classifies a non-current asset (or the group of assets held for sale) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or the group of assets held for sale) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. For the sale to be highly probable management must be committed to a plan to sell the asset (or the group of assets held for sale) and an active program to locate a buyer and complete the plan must have been initiated. Furthermore, the asset (or the group of assets held for sale) must be actively marketed for sale at a price that is reasonable in relation to its fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Impairment of Assets Tangible and intangible assets are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an

asset exceeds its recoverable amount, an impairment loss is recognized in income for items of tangibles and

intangibles carried at cost.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which

are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are

added to the cost of those assets, until such time as the assets are substantially ready for their intended use or

sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure

on qualifying assets is deducted from the borrowing costs eligible for capitalization. All of the other

borrowing costs are recorded in the income statement in the period in which they are incurred. For the periods

ended at 30 June 2013 and 31 December 2012 there is no capitalized borrowing cost. Effects of Change in Currency Rate

Assets and liabilities in foreign currency and purchase and sale commitments create exchange risk. Foreign

exchange risk stemming from depreciation or appreciation of Turkish Lira managed by top management by

following the currency position of Group and taking position according to approved limits.





-17-

Taxes on Income

Taxes on income for the period comprise current tax and the change in the deferred taxes.

Current Tax Provision

The charge for current tax is based on the results for the period as adjusted for items which are non-assessable

or disallowed. Taxable profit differs from profit as reported in the income statement because it excludes tems

of income or expense that taxable or deductible in other years and it further excludes items that are never

taxable or deductible.

Deferred tax

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the

financial statements and the corresponding tax bases use in the computation of taxable profit, and are

accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all

taxable temporary differences and deferred tax assets are recognized for all deductable temporary differences

to the extent that it is probable that taxable profits will be available against which those deductible temporary

differences can be utilized. Such assets and liabilities are not recognized if the temporary differences arisen

from goodwill or from the initial recognition (other than in a business combination) of other assets and

liabilities in a transaction that affects neither the taxable profit not the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associates with investments in

subsidiaries and associates and interests in joint ventures, except where the Group is able to control the

reversal of the temporary differences and it is probable that the temporary differences associated with such

investments and interests are only recognized to the extent that it is probable That there will be sufficient

taxable profits against which to utilize the benefits of the temporary differences and they are expected to

reverse in the foreseeable future.

The carrying amounts of deferred tax assets is reviewed at each balance sheet date and reduce to extent that is

no longer probable that sufficient taxable profits will be available to allow all part of the assets to be

recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in

which the liability is settled or the asset realized, based on tax rates (and the tax laws) that have been enacted

or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets

reflects the tax consequences that would follow from the manner in which the Company expects, at the

reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax

assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority

and the Company intends to settle its current tax assets and liabilities on a net basis.





-18-

Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to

items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or

where they arise from the initial accounting for a business combination. In the case of a business combination,

the tax affect is taken into account in calculating goodwill or determining the excess of the acquirer‘s interest

in the net fair value of the acquiree‘s identifiable assets liabilities and contingent liabilities over cost.

Mergers and Goodwill

Business merger and acquisition is combining of two separate legal entities or organizations into an entity that makes reporting. Business merger is accounted based on acquisition method within the context of IFRS 3.

Acquisition cost contains the fair value of assets given in purchase date; issued capital instruments, assumed and realized payables due to change, the costs that can be associated with additional acquisition. If the business merger agreement includes articles that foresees that cost can be adjusted according to the future actions, this adjustment is probable, and this adjustment is include into merger cost that formed on the day of acquisition when the value is detected. The effective interest rate, financial instrument or, where appropriate through the expected life of a time period shorter than the estimated future cash payments related to the ratio that reduces the net present value of a financial liability.

The difference between the acquisition cost coming from purchase of an organization and fair value of identifiable asset, liability and conditioned liabilities is accounted as goodwill in consolidated financial statements.

Goodwill occurred during business merger is not subject to depreciation, instead of this, impairment test is used once in a year or frequently when the conditions indicate impairment. Impairment losses calculated over goodwill is not associated with income statement even in case when impairment disappears in following periods. Goodwill is associated with cash generating units at the time of impairment test.

If real value of acquired assets, liability and contingency liabilities exceeds the business merger cost, then the

difference is accounted in the consolidated income statements as goodwill.

Business Mergers Subject to Joint Control

Business mergers including joint ventures or joint control means all ventures or businesses, before and after the merge, being controlled by the same person or group and their control is not temporary. Business mergers subject to joint control should be recognized using the pooling of interest method, and thus goodwill should not be included in the financial statements. While using the pooling of interest method, the financial statements should be prepared as if the combination has taken place as of the beginning of the reporting period in which the common control occurs and should be presented comparatively from the beginning of the reporting period in which the common control occured. It‘s admissible to look at the business mergers subject to joint control from parent company‘s point of view, from beginning of the consolidation date and after Group‘s parent company obtained the common control, accounting of combined financial statements regulated in regard of the UMS standards as if the financial statements prepared with UMS standards. To fix the inconsistency between assets – liabilities, as a result of the business mergers subject to joint control, ―Effect of the Mergers Subject to Joint Control‖ account classified under equity is used.





-19-

Provisions, Contingent Liabilities and Assets Provisions

Provisions are recognized when an enterprise has a present obligation (legal or constructive) as a result of a

past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable

estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and

adjusted to reflect the current best estimate.

Contingent liabilities and assets

Transactions that may give rise to contingencies and commitments are those where the outcome and the

performance of which will be ultimately confirmed only on the occurrence or non occurrence of certain future

events, unless the expected performance is not very likely. Accordingly, contingent losses are recognized in

the financial statements of Group if a reasonable estimate of the amount of the resulting loss can be made.

Contingent gains are reflected only if it is probable that the gain will be realized.

Renting Transactions Group – As renter Financial leasing Group acquired assets under finance lease agreements and capitalized at the inception of the lease starting from acquired date. Payables to lease are pursued under financial leasing liability in balance sheet. Calculation of minimum leasing payment is to find out current market value as the valid proportion is calculated practically in financial leasing process then it is, otherwise proportion of interest rate of loan is used as discount factor. Expenses of asset acquisition through financial leasing are included in costs. The liability from financial leasing is decomposed into interest rate and the main loan. Expenses of interest rate are calculated with the fixed interest rate and are issued in related periods. Operating Leases Leases where a significant portion of the risks and rewards of ownership a retained by the lesser a classified as

operating leases. Payments made under operating leases are charged to the income statement on a straight-line

basis over the period of lease. Income Accruals

Revenue is recognized on the accrual basis at the time deliveries are made, at the invoiced values. Net sales reflect gross sales, net of sales discounts and returns.





-20-

Related Parties

In the presence of one of the following criteria, parties are considered as related to Group,

(a) Directly, or indirectly through one or more intermediaries, the party,

(i) Controls, is controlled by, or is under common control with, Group (this includes parents, subsidiaries and

fellow subsidiaries);

(ii) Has an interest in Group that gives it significant influence over the Company; or

(iii) Has joint control over Group;

(b) The party is an associate of Group,

(c) The party is a joint venture, in which Group is a venture,

(d) The party is member of the key management personnel of Group or its parent,

(e) The party is a close member of the family of any individual referred to in (a) or (d),

(f) The party is an entity that is controlled, jointly controlled or significantly influenced by, or for which

significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e),

(g) The party has a defined benefit plan for the employees of the Company or a related party of the Company.

Transactions with related parties are transfer of resources or obligations between related parties, regardless of

whether a price is charged. Group interacts with its related parties within the frame of ordinary business

activities (Note 7).

Summarized info about related parties of Group is as follows:

Naksan Holding A.Ş. (Naksan Holding): Naksan Holding Anonim Şirketi was established in Gaziantep,

Turkey in 2007 and moved to its‘ head office to Istanbul, Turkey in the year of 2009. Naksan Holding was

established as a corporation taking part in the management and auditing of the companies operating in

production of plastic, packaging, carpets, production plant of electricity, building mining concerns and other

sectors and providing consultancy about financing, investment, organization, marketing and selling.

Naksan Plastik Sanayi ve Ticaret A.Ş. (Naksan Plastik): The Company was established in 1980 in Gaziantep

and it is mainly engaged with production of plastic packaging materials such as Shrink films, stretch films,

plastic bags, carrier bags, garbage bags, refuse sacks, plain PP films, PE bubble films and also printed

flexible packaging products.

Nakpilsa Dokuma Sanayi ve Ticaret A.Ş. (Nakpilsa Dokuma): The Company was established in 2005 and the

activities of the Company are primarily concentrated on production of PE-PP coated and uncoated woven

tarpaulin, big bag fabric and big bag (FIBC), PVC coated polyester tarpaulin, Packaging Products and the sale

of these products in domestic markets. Company merged with Naksan Plastik ve Enerji Sanayi ve Ticaret

Anonim Şirketi with complete transfer of all assets and liabilities in accordance with article 451 of the 6762

numbered Turkish commercial law and Corporate Tax Law no: 19 and 20 of 5520 dated 18 August 2010 on

31 March 2012. Adularya Enerji Elektrik Üretimi ve Madencilik A.Ş. (Adularya Enerji): The Company was established in

2007 in Ankara and it is mainly engaged with establishing production plant of electricity, building mining

concerns, searching for subsurface and surface mines and selling and marketing of these goods.

Poletsan Plastik Sanayi ve Ticaret A.Ş. (Poletsan): The Company was originally incorporated on 04 July

1994 in Gaziantep. As of 31 December 2006 the Company does not any have production and marketing

facility and press machinery registered as assets of the company is rented to Naksan Plastik.





-21-

Naksan Kollektif Şti. (Naksan Kollektif): The Company was incorporated on 30 May 2000 in Gaziantep free

trade zone and engages in trading of raw materials to the Company.

Cahit ve Osman Nakıboğlu: It is an ordinary partnership and engages in sales and marketing on behalf of

Company.

Bilim Plastik Kimya Nakliyat Turizm Sanayi Ticaret Anonim Şirketi (Bilim Plastik): The Company was

incorporated in Aliağa, Izmir in 1997 and engages in chemical and transportation.

Akkoza Mensucat Sanayi ve Ticaret A.Ş. (Akkoza Mensucat): The Company was incorporated in 1973 in

Gaziantep and engages in production of yarn.

Elmacı Pazarı Bilgisayar Yazılım ve İletişim Sanayi ve Ticaret A.Ş. (Elmacı Pazarı): The Company was

incorporated on 01 September 2008 in Gaziantep and is engaged in production, sales, marketing and after

sales services of any kind of computer, hardware, and software and computer spare parts.

Naksan Elektrik Enerjisi Toptan Satış A.Ş.: The Company was established on 23 July 2010 in Gaziantep,

Turkey. The activities of the Company are primarily concentrated on wholesale activity of the electrical

energy to the direct consumers.

Naksan Enerji Elektrik Üretimi A.Ş.: The Company was established on 23 July 2010 in Gaziantep, Turkey.

The Company engages in constructing production facility of electrical energy, processing of the facility and

producing the electrical energy.

Naksan Teknoloji ve İletişim Sistemleri Sanayi ve Ticaret A.Ş.: The Company was established on 25 June

1988 with the title of Naksan Sigorta Aracılık Hizmetleri Ltd. Şti. The name of the Company was changed

and registered to the current name on 21 July 2010. The activities of the Company are primarily concentrated

on production and marketing of the computer equipments.

Bakım Elektrik Plastik Tekstil Sanayi ve Ticaret A.Ş: The Company was originally incorporated on 9 May

2006 in Gaziantep. The Company primarily engages in production and repairing activities of the electrical

equipments. The Company also concentrated on converting plastic raw materials to the semi-finished goods

and trading these goods.

Naksan Gıda ve Tarımsal İşletmeleri Sanayi ve Ticaret A.Ş.: The Company was established on 13 September

2004 with the title of Naksan Kimya Sanayi ve Ticaret Ltd. Şti. The name of the Company was changed and

registered to the current name on 29 December 2010. The activities of the Company are primarily

concentrated on producing and trading of the agricultural goods.

Gülnak Elektrik Üretim A.Ş.: Gülnak Elektrik Üretim A.Ş. was established in 2011 in Ankara, Turkey. It is

engaged in building of electricity production plant from natural gas. As of 31 December 2012, the Company

has not started its‘ operational activities yet and there is no personnel employed by the Company.

Foreign Currency Assets and Liabilities

Foreign currency transactions are entered in the accounts with current rates in transaction date. Foreign

currency assets and liabilities in the balance sheet are converted to the TRY as the rates in the balance sheet

date. Foreign exchange profit and loss are reflected to the income statements.

Foreign currency rates that are used at the end of the periods are as follows:

30.06.2013 31.12.2012

USD 1.9248 1.7826

EUR 2.5137 2.3517

GBP 2.9292 2.8708

CHF 2.0323 1.9430





-22-

Segment Reporting of Operation Results A business segment is distinguishable component of an enterprise that is engaged in providing an individual

product or service or a group of related products or services and that is subject to risks and returns that are

different from those of other business segments. A geographical segment is a distinguishable component of an

enterprise that is engaged in providing products or services within a particular economic environment and that is

subject to risks and returns that are different from those of components operating in other economic

environments.

A reportable segment is business segment or a geographical segment identified based on the foregoing

definitions for which segment information is required to be disclosed. A business segment or geographical

segment should be identified as a reportable segment if a majority of its revenue is earned from sales to external

customers and its revenue from sales to external customers and from transactions with other segments is 10% or

more of the total revenue, external and internal, of all segments; or its segment result, whether profit or loss, is

10% or more of the combined result of all segments in profit or the combined result of all segments in loss,

whichever is the greater in absolute amount; or its assets are 10% or more of the total assets of all segments.

Group operates in same geographical area and operates in yarn and carpet sector. Because of this reason,

segment reporting of yarn and carpet are described in Note 6.

Severance Pay Provision / Employee Benefits

Severance Pay

Under Turkish Labor Law, Group is required to pay termination benefits to each employee who has

completed one year of service and whose employment is terminated without due cause, or who retires in

accordance with social insurance regulations or is called up for military service or dies. As of 30 June 2013

payments are calculated on the basis of 30 days‘ pay limited to a maximum of TRY 3,129 (31 December

2012: TRY 3,034) per year of employment at the rate of pay applicable at the date of retirement.

Group calculates provisions for severance pay in the attached consolidated financial statements in

consideration of previous years experiences on deserving severance pay and also, discount rate generated

from effective interest rate and inflation on balance sheet period was included in calculations. All of profits

and losses except calculated actuarial profit / (loss) was shown in consolidated statements of income, actuarial

profit / (loss) was shown in consolidated statements of changes in equity.

The rates of basic assumptions used at balance sheet date are as follows

30 June 2013

31 December

2012

Rediscount rate 8.50% 10.00%

Inflation rate 5.00% 6.07%

Real discount rate 3.33% 3.71%

Social Insurance Premium

Group pays social security contribution to social security organization compulsorily. So long as Group pays

these premiums, it has no liability. These premiums are reflected as personnel expenses in the period in which

they are paid.





-23-

Dividends

Dividends receivable are recognized as income in the period when they are declared and dividends payables

are recognized as an appropriation of profit in the period in which they are declared.

Paid in Capital

Common stocks are classified to equity. Costs related to new shares and option issued, are shown in equity by

deducting the collected amounts whose tax effect was deducted. Share Premiums / Discounts Share premium represents differences resulting from the sale of the Group‘s subsidiaries and associates‘

shares at a price exceeding the face value of those shares and differences between the face value and fair value

of shares issued for acquired Companies.

Revenue

Revenues are recognized on an accrual basis at the time deliveries or acceptances are made, the amount of the

revenue can be measured reliably and it is probable that the economic benefits associated with the transaction

will flow to Group, at the fair value of consideration received or receivable. Net sales represent the invoiced

value of goods shipped less sales returns, commission and sales taxes. The Group‘s sales are comprised of

machine carpet, BCF yarn and other sales of merchandises.

Sales of goods

Revenue from sales of coal is recognized when all the following conditions are satisfied:

- Company has transferred to the buyer the significant risks and rewards of ownership of the goods,

- Company retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold,

- The amount of revenue can be measured reliably,

- It is probable that the economic benefits associated with the transaction will flow to the entity,

- The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of services

When the outcome of a transaction of transportation incomes and license fee involving the rendering of

services can be estimated reliably, revenue associated with the transaction shall be recognized by reference to

the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be

estimated reliably when all the following conditions are satisfied:

- The amount of revenue can be measured reliably,

- It is probable that the economic benefits associated with the transaction will flow to the company;

- The stage of completion of the transaction at the balance sheet date can be measured reliably, and

- The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.





-24-

Interest income

Interest income is accrued in proportion as effective interest rate which reduces estimated cash addition to

recorded value of the asset in corresponding period.

Dividend and other incomes

Dividend income which obtained from share investments, is recorded when shareholders‘ have the right to get

dividend.

Other incomes are recorded with the possibility of having the worth giving service or accrual of the facts

related with income, making the transfer of risk and benefit, determination of income amount and enrollment

of economic benefits related with the procedure.

Government Incentive and Grants

It is a procedure to assist the companies that are unable to achieve certain businesses. It is to stimulate the

businesses with the incentives. Government incentives, including those followed at their fair values will be

included in the financial statements only if there is reasonable assurance that the Company will fulfill all

required conditions and acquire the incentive.

Government incentives, including non-monetary grants at fair value, are included in the financial statements

only if there is reasonable assurance that the Company will fulfill all required conditions and acquire the

incentive.

Post Balance Sheet Events

Although post balance sheet events arise after the explanation of the financial information to the public or any

announcement related to profitability, it encloses all the events with balance sheet date and authorization date

for the diffusion of the balance sheet.

Group adjusts the amounts in the consolidated financial statements if there exists any events necessitates

adjustment. Subsequent events are stated in the consolidated notes to financial statements, if they do not need

adjustments.

Earnings Per Share

Earnings per share in the consolidated income statements are calculated by dividing the net profit for the year

by the weighted average number of ordinary shares outstanding during the year.

In Turkey, companies can increase their share capital by making distribution of ―bonus shares‖ to existing

shareholders from inflation adjustment difference in shareholder‘s equity. For the purpose of the earnings per

share computations, the weighted average number of shares outstanding during the year has been adjusted in

respect of ―bonus shares‖ issued without corresponding change in resources by giving them retroactive effect

for the period in which they were issued and each earlier period.





-25-

Cash Flow Statement

The Group prepares statement of cash flows to inform users of financial statements about changes in net assets

and ability to direct financial structure, amounts and timing of cash flows according to changing situations. In

the statement of cash flows, current period cash flows are grouped according to operating, financing, and

investing activities. Operating cash flows resulting from activities in scope of Group's main operating scope.

Cash flows related to investing activities are cash flows resulting from investing activities (fixed investments and

financial investments) of the company. Cash flows related to financing activities comprise of funds used in

financing activities of the Group and their repayments. Cash and cash equivalents comprise cash on hand and

demand deposits and other short-term highly liquid investments which their maturities are three months or

less from date of acquisition and that are readily convertible to a known amount of cash and are subject to an

insignificant change in value.

NOTE 3 – BUSINESS MERGERS

None (31 December 2012 - None).

NOTE 4 – BUSINESS MERGERS SUBJECT TO JOINT CONTROL

Business mergers including joint ventures or joint control means all ventures or businesses, before and after the merge, being controlled by the same person or group and their control is not temporary.

For the period ended at 30 June 2013 details of business mergers subject to joint control is as follows;

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi (―Royal Halı‖) acquired 2,550 shares

corresponding to 51% of Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi‘s (―Atlas Halı‖)

shares from its main shareholder company Naksan Holding Anonim Şirketi with a price amounting to TRY

2,550,000 at 29 January 2013.

As a result of these acquisition details of acquired net assets and negotiated purchase shown in equity as

―Merger Effect of Businesses Subject to Joint Control‖ is as follows;

Book value before

merger

Fair value

Adjustment Fair value

Short term assets 7,134,123 779 7,134,902

Long term assets 636,621 1,430,093 2,066,714

Short term liabilities 8,873,902 (83,225) 8,790,677

Long term liabilities 7,062 91,244 98,306

Net assets/ (liabilities) 312,633

The ratio of Royal Halı‘s partnership 51.00%

Net assets/ (liabilities) acquired from the company 159,443

Acquisition cost 2,550,000

Merger Effect of Businesses Subject to Joint Control or Joint Ventures (Note 22.5) 2,390,557 1

For the period ended 31 December 2012, there are no any business mergers subject to joint control.





-26-

NOTE 5 – SHARES IN OTHER COMPANIES

As of 30 June 2013, the detail of Parent Company‘s direct or indirect shares in other companies and datas of

these companies is as follows;

Ownership of the Parent

Company through the

subsidiary

Minority

Interest

Subsidiaries (Direct)

(Direct+

Indirect) (Ratio)

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi 51.00% 51.00% 49.00%

For the period ended at 30 June 2013, summaries of financial information about Parent Company‘s subsidiary

are as follows;

Subsidiaries Nature of

Activities

Total

Assets

Total

equity

Revenue,

net

Period

profit /

(loss)

Atlas Halı Carpet Sector 11,344,419 (197,022) 4,672,668 (508,389)

Detailed information about subsidiary is presented in Note 1.

As of 31 December 2012, Parent Company does not have any shares in other companies.





-27-

NOTE 6 – SEGMENT REPORTING

Group operates in same geographical area and operates in yarn and carpet sector. For this reason, segment

reporting is based on the yarn and carpet sectors.

As of 30 June 2013 and 31 December 2012, segment reporting of balance sheet is as following;

30 June 2013 Carpet Sector Yarn Sector Other (*) Total

Trade receivables 76,393,960 2,696,542 1,374,178 80,464,680

Inventories 40,594,947 4,215,425 323,397 45,133,769

Tangible fixed assets 81,002,904 36,528,079 - 117,530,983

Intangible fixed assets 5,950,117 - - 5,950,117

Other assets 44,235,654

Total assets 293,315,203

Trade payables 29,761,193 4,890,489 - 34,651,682

Other payables and liabilities 74,187,233

Total liabilities 108,838,915

31 December 2012 Carpet Sector Yarn Sector Other (*) Total

Trade receivables 50,973,911 5,148,288 2,976,927 59,099,126

Inventories 28,869,198 2,664,809 37,872 31,571,879

Tangible fixed assets 72,309,992 33,045,010 - 105,355,002

Intangible fixed assets 6,594,689 - - 6,594,689

Other assets 27,698,466

Total assets 230,319,162

Trade payables 30,066,366 3,980,763 - 34,047,129

Other payables and liabilities 59,519,444

Total liabilities 93,566,573

(*) Related amounts consist of operations excluding carpet and yarn operations.

As of 30 June 2013 and 31 December 2012 segment reporting of provision for doubtful receivables is as

below;

30 June 2013 Carpet Sector Yarn Sector Total

Provision for doubtful trade receivables 1,227,976 21,920,189 23,148,165

Total 23,148,165

31 December 2012 Carpet Sector Yarn Sector Total

Provision for doubtful trade receivables 1,059,460 21,920,189 22,979,649

Total 22,979,649





-28-

For the periods ended at 30 June 2013 and 2012 segment reporting of consolidated income statement is as

follows;

01 January - 30 June 2013 Carpet Sector Yarn Sector Other (*) Total

Sales 63,348,222 46,060,994 7,485,556 116,894,772

Cost of sales (35,464,273) (38,534,023) (7,247,814) (81,246,110)

General administrative expenses (3,433,257) (478,132) - (3,911,389)

Marketing, sales and distribution expenses (14,371,379) (367,322) (174,194) (14,912,895)

Research and development expenses (79,526) - - (79,526)

Other operating income / (expenses), net (1,102,873)

Investment activities income / (expenses), net (65,957)

Financial income / (expenses), net (2,630,987)

Tax expenses for the period (3,442,062)

Deferred tax income / (expense) 319,020

Profit / (loss) for the period, net 9,821,993

01 January - 30 June 2012 Carpet Sector Yarn Sector Other (*) Total

Sales 59,648,856 42,144,518 8,903,138 110,696,512

Cost of sales (37,393,596) (33,157,979) (8,763,589) (79,315,164)

General administrative expenses (1,525,983) (2,167,239) - (3,693,222)

Marketing, sales and distribution expenses (12,006,084) (250,448) (205,580) (12,462,112)

Research and development expenses (53,490) - - (53,490)

Other operating income / (expenses), net - - 900,373

Investment activities income / (expenses), net 265,098

Financial income / (expenses), net 4,287,679

Tax expenses for the period (3,621,386)

Deferred tax income / (expense) (163,571)

Profit / (loss) for the period, net 16,840,717

(*) Related amounts consist of operations excluding carpet and yarn operations.





-29-

The distribution of depreciation of tangible fixed assets and amortization of intangible fixed assets by

segments for the periods ended at 30 June 2013 and 2012 are as below,

01 January - 30 June 2013 Carpet Sector Yarn Sector Total

Depreciation of tangible fixed assets 2,337,606 1,736,169 4,073,775

Amortization of intangible fixed assets 1,020,814 21,527 1,042,341

Total 3,358,420 1,757,696 5,116,116

01 January - 30 June 2012 Carpet Sector Yarn Sector Total

Depreciation of tangible fixed assets 2,106,798 1,538,220 3,645,018

Amortization of intangible fixed assets 996,443 19,769 1,016,212

Total 3,103,241 1,557,989 4,661,230

NOTE 7 – RELATED PARTY TRANSACTIONS

i) Due from/to related parties:

a) Due from related parties in trade receivables are as following (Note 10):

30.06.2013 31.12.2012

Naksan Plastik (**) 2,173,837 4,906,228

Naksan Holding 1,326,965 -

Elmacı Pazarı Bilgisayar Yazılım 236,946 -

Elma Sepeti - 4,645

Cahit ve Osman Nakıboğlu 576 -

Atlas Halı (*) - 4,618,721

3,738,324 9,529,594

(*) This amount is composed of carpet sales to the Company. For the period ended at 30 June 2013, Royal

Halı acquired 51% of Atlas Halı‘ shares, as a result Atlas Halı is included in complete consolidation.

(**) This amount is composed of BCF yam and carpet sales to the Company.





-30-

b) Due to related parties in trade payables are as following (Note 10):

30.06.2013 31.12.2012

Cahit ve Osman Nakıboğlu 28,975 -

Elmacı Pazarı 2,356 197

Naksan Elektrik Enerji Üretim - 161,446

31,331 161,643

c) Due from shareholders in other short term receivables is as following (Note 11):

30.06.2013 31.12.2012

Naksan Holding 382,197 833,101

382,197 833,101

ii) Sales, purchases and operations to related parties:

a) Net sales to related parties classified under sales revenue is as following:

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Plastik (*) 44,098,290 35,363,051

Elmacı Pazarı 133,880 -

Naksan Holding 7,514 -

Atlas Halı (**) - 2,217,456

Cahit ve Osman Nakıboğlu - 33,459

Elma Sepeti - 5,510

Adularya Enerji 942 -

44,240,626 37,619,476

(*) These amounts are composed of BCF yam and carpet sales to the Company. For the period ended at 30

June 2013 TRY 43,591,854 of sales consists of export registered sales (01 January - 30 June 2012: TRY:

26,606,718).

(**) These amounts are composed of carpet sales to the Company. For the period ended at 30 June 2013, Royal

Halı acquired 51% of Atlas Halı‘ shares, as a result Atlas Halı is included in complete consolidation.





-31-

b) Purchases from related parties classified under cost of sales are as follows:

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Plastik (*) 14,757,189 17,508,505

Elmacı Pazarı 77,623 52,147

14,834,812 17,560,652

(*)For the period ended at 30 June 2013 and 2012 details of purchases from the company are as follows;

01 January - 30 June 2013

Raw material

purchases

Merchandise

purchases

Energy

purchases

Rent

expenses

Other

purchases Total

Naksan Plastik 2,324,311 7,351,236 4,609,696 154,960 316,986 14,757,189

2,324,311 7,351,236 4,609,696 154,960 316,986 14,757,189

01 January - 30 June 2012

Raw material

purchases

Merchandise

purchases

Energy

purchases

Rent

expenses

Other

purchases Total

Naksan Plastik 5,110,162 8,335,051 3,733,192 138,000 192,100 17,508,505

5,110,162 8,335,051 3,733,192 138,000 192,100 17,508,505

c) Purchases from related parties classified under marketing, selling and distribution expenses are as follows:

01.01.-

30.06.2013

01.01.-

30.06.2012


Elmacı Pazarı 1,400 85

Naksan Plastik 15,215 -

Adularya Enerji 3,000 -

Atlas Halı - 1,800

41,510 21,341

d) Purchases from related parties classified under general administrative expenses are as follows:

01.01.-

30.06.2013

01.01.-

30.06.2012


Naksan Plastik 11,888 -

Elmacı Pazarı - 557

120,593 29,858





-32-

e) Rent and other incomes from related parties classified under other operating income are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Plastik 44,000 3,000

Atlas Halı - 3,254

44,000 6,254

f) Interest incomes from related parties classified under investment activities incomes are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012


Naksan Plastik - 229,187

20,416 401,378

g) Interest expenses to related parties classified under investment activities expenses are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Plastik - 5,561


124,008 136,280

h) Interest expenses to related parties classified under financial expenses are as follows:

01.01.-

30.06.2013

01.01.-

30.06.2012


211,239 130,720





-33-

i) Purchases of tangible and intangible fixed assets from related parties are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Holding 56,620 -

Elmacı Pazarı - 13,796

56,620 13,796

j) Details of share purchases from shareholders are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Holding (*) 2,550,000 -

2,550,000 -

(*) In 29 January 2013 Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi, acquired 2,550 of

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi‘s shares amounting to TRY 2,550,000 from

Naksan Holding Anonim Şirketi.

k) Income from shareholders classified under share premiums / discounts are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Naksan Holding (**) 1,110,362 -

1,110,362 -

(**) Parent Company, reflected part of the expenses from initial public offering to its parent company Naksan

Holding. Net-off was performed direct expenses from initial public offering, shown in Share premium

account and income from the reflection of the expenses in share premium account.

l) Wage and benefits provided for the board members and managers are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Short term benefits provided to employees 404,752 162,383

Benefits provided after leaving - -

Other long term benefits - -

Benefits provided due to termination - -

Share based payments - -

404,752 162,383





-34-

NOTE 8 – CASH AND CASH EQUIVALENTS

As of 30 June 2013 and 2012 the details of cash and cash equivalents are as follows;

30.06.2013 31.12.2012

Cash 84,609 82,028

Banks 317,062 1,487,435

Other liquid assets 161,439 92,887

563,110 1,662,350

As of 30 June 2013 and 31 December 2012 Group‘s bank deposits are composed of demand deposits. As of 30

June 2013, there are no blokage over the demand deposits. (31 December 2012: TRY 133,695 blocked account).

Other liquid assets are composed of the receivables from banks due to credit card transaction in the Group.

NOTE 9 – FINANCIAL BORROWINGS

As of 30 June 2013 and 31 December 2012 the details of short and long term financial borrowings are as

follows;

30.06.2013 31.12.2012

Short term bank borrowings 2,473,444 9,893,900

Short term lease payables, net 570,791 39,364

Current installments of long term bank borrowings 7,307,536 9,619,443

Accrued interest of bank borrowings and financial leases 229,177 476,332

Total short term financial payables 10,580,948 20,029,039

Long term bank borrowings 10,765,572 7,716,516

Long term lease payables, net 14,291,123 477,611

Total long term financial borrowings 25,056,695 8,194,127

Total financial borrowings 35,637,643 28,223,166

As of 30 June 2013 the average effective interest rates of USD, EUR and TRY bank borrowings are 3.23%,

4.27% and 6.00% ( 31 December 2012: USD - 3,66%, EUR - 5,20%, TRY - 7.15%).





-35-

As of 30 June 2013 and 31 December 2012 maturity analysis of bank borrowings (except accrued interest on

borrowings) is as follows:

30.06.2013 31.12.2012

Due in 0 - 1 years 9,780,980 19,513,343

Due in 1 - 2 years 6,329,630 2,204,719

Due in 2 - 3 years 2,217,971 2,204,719

Due in 3 - 4 years 2,217,971 2,204,719

Due in 4 - 5 years - 1,102,359

20,546,552 27,229,859

As of 30 June 2013, the details of the bank borrowings (except accrued interest on borrowings) based on

currency are as follows:

Currency Amount Currency rate TRY Equivalent

TRY 1,037,749 1.0000 1,037,749

USD 2,659,814 1.9248 5,119,610

EUR 5,724,308 2.5137 14,389,193

Total 20,546,552

As of 31 December 2012, the details of bank borrowings (except accrued interest on borrowings) based on

currency is as follows:

Currency Amount Currency rate TRY Equivalent

TRY 3,977,000 1.0000 3,977,000

USD 2,833,334 1.7826 5,050,701

EUR 7,740,000 2.3517 18,202,158

Total 27,229,859

As of 30 June 2013 and 31 December 2012 maturity analysis of financial lease payables (except accrued

interest) is as below:

30.06.2013 31.12.2012

Due in 0 - 1 years 570,791 39,364

Due in 1 - 2 years 3,520,033 125,173

Due in 2 - 3 years 3,785,413 145,467

Due in 3 - 4 years 4,009,255 131,657

Due in 4 - 5 years 2,976,422 75,314

14,861,914 516,975





-36-

As of 30 June 2013, the details of financial lease payables (except accrued interest) are as below:

Currency Amount Currency Rate TRY Equivalent

EUR 5,912,366 2.5137 14,861,914

Total 14,861,914

As of 31 December 2012, the details of financial lease payables (except accrued interest) are as below:

Currency Amount Currency Rate TRY Equivalent

EUR 219,830 2.3517 516,975

Total 516,975

As of 30 June 2013 the Group has amounting to TRY 2,692,545 export commitments to the banks for the

export borrowings (31 December 2012: TRY 4,134,300). Furthermore, bank borrowings are secured by

personal guarantees of shareholders and related parties (Note 19).

NOTE 10 – TRADE RECEIVABLES AND PAYABLES

As of 30 June 2013 and 31 December 2012 the details of trade receivables are as follows;

Short term trade receivables

30.06.2013 31.12.2012

Trade receivables 13,998,979 12,818,949

Unearned interest on trade receivables (-) (1,678,959) (1,169,495)

Notes receivables 57,280,033 37,235,911

Trade receivables from related parties (Note 7) 3,738,324 9,529,594

Doubtful trade receivables 29,638,200 23,315,091

Provision for doubtful trade receivables (-) (23,148,165) (22,979,649)

79,828,412 58,750,401

As of 30 June 2013 average maturity of trade receivables is 63 days (31 December 2012: 66 days).





-37-

As of 30 June 2013 and 31 December 2012 maturity schedule of notes receivables is as follows:

30.06.2013 31.12.2012

Overdue 3,071,507 783,889

1-30 days 5,949,625 4,145,939

31-60 days 3,302,056 3,832,152

61-90 days 5,666,168 4,033,608

91-120 days 5,464,130 4,985,408

121-150 days 5,764,914 5,165,711

151-180 days 6,494,476 4,410,978

181-210 days 5,048,769 3,587,867

211-240 days 8,060,881 2,549,644

241-270 days 3,361,218 1,725,560

271-300 days 2,593,125 1,060,755

301-330 days 1,858,887 612,100

331-360 days 644,277 342,300

57,280,033 37,235,911

As of 30 June 2013 and 31 December 2012 aging of overdue receivables that are not impaired are as

following;

30.06.2013 31.12.2012

Within 30 days 3,071,507 748,237

31 - 60 days - 35,652

3,071,507 783,889

The management of Group do not estimate a collection risk for these receivables as the significant portion of

these receivables is due from significant customers where sales are made regularly and maturity period of

overdue receivables is at a reasonable level (Note 32 Credit Risk).

For the periods ended at 30 June 2013 and 31 December 2012 the movement schedule of provision for

doubtful receivables is as follows:

01.01.-

30.06.2013

01.01.-

31.12.2012

Opening balance 22,979,649 21,071,572

Collections - (7,003)

Provisions for the period 168,516 1,915,080

Closing balance 23,148,165 22,979,649





-38-

Long term trade receivables

30.06.2013 31.12.2012

Notes receivables 687,611 378,200

Unearned interest on notes receivables (-) (51,343) (29,475)

636,268 348,725

Maturities of long term notes receivables are between one and two years.

As of 30 June 2013, Group has received letters of guarantee amounting to TRY 7,759,000, security bands

amounting to TRY 8,640,000 and letters at guarantee mortgages amounting to TRY 10,736,406 (Note 18) (31

December 2012 : TRY 7,300,000 letters of guarantee, TRY 10,940,000 mortgages and TRY 3,556,685

security bonds).

As of 30 June 2013 and 31 December 2012 the details of trade payables are as follows;

Short term trade payables

30.06.2013 31.12.2012

Trade payables 11,015,876 9,362,556

Due to related parties (Note 7) 31,331 161,643

Accrued expenses in accordance with aggrements 2,144,725 361,642

Notes payables 17,610,907 19,414,274

Unearned interest on payables (-) (236,542) (183,592)

30,566,297 29,116,523

As of 30 June 2013, average maturity of trade payables is 57 days (31 December 2012: 53 days).

As of 30 June 2013, amounting to TRY 1,193,376 of the notes payables consists of bill surety payables (31

December 2012: TRY 10,256,496).

As of 30 June 2013, amounting to TRY 898,468 of trade payables consists of letters or credits. (31 December

2012: None).





-39-

Maturity schedule of notes payables as of 30 June 2013 and 31 December 2012 are as following:

30.06.2013 31.12.2012

1-30 days 5,599,861 6,334,965

31-60 days 3,499,981 4,405,742

61-90 days 5,277,299 1,255,675

91-120 days 1,074,166 4,312,680

121-150 days 679,222 -

151-180 days - 1,000,000

181-210 days - 1,105,212

241-270 days 35,000 -

331-360 days 1,445,378 1,000,000

17,610,907 19,414,274

Long term trade payables

30.06.2013 31.12.2012

Notes payables 4,461,818 5,526,495

Unearned interest on payables (-) (376,433) (595,889)

4,085,385 4,930,606

Maturity schedule of notes payables as of 30 June 2013 and 31 December 2012 are as follows:

30.06.2013 31.12.2012

1 - 2 years 1,445,378 2,704,455

2 - 3 years 3,016,440 1,411,020

3 - 4 years - 1,411,020

4,461,818 5,526,495

Long term notes payable are given to Pls Marka Ticaret Ltd. Şti. for the usage right of ―Pierre Cardin‖ trade

mark (Note 16).





-40-

NOTE 11 – OTHER RECEIVABLES AND PAYABLES

As of 30 June 2013 and 31 December 2012 the details of other receivables are as follows;

Other current receivables

30.06.2013 31.12.2012

Deposits and guarantees given 112,040 116,316

Due from shareholders (Note 7) 382,197 833,101

Notes receivables which are received as advance 15,116,956 8,286,842

VAT receivables from the tax office (*) 2,987,469 721,196

18,598,662 9,957,455

(*) VAT receivables, consist of VAT receivables from exports and VAT receivables from reduced VAT rates.

As of 30 June 2013 and 31 December 2012 the details of non trade receivables from related parties are indicated in Note 7. For these non trade receivables, Group had calculated interest and reflected the amounts to the consolidated financial statements (Note 7 and 27).

Other non-current receivables

30.06.2013 31.12.2012

Deposits and guarantees given 132,280 56,251

Notes receivables which are received as advance 4,264,789 1,281,250

4,397,069 1,337,501

As of 30 June 2013 and 31 December 2012 the details of other payables are as follows;

Other current payables

30.06.2013 31.12.2012

Taxes and funds payable 123,786 135,622

Other payables 3,576 -

127,362 135,622

Other non-current payables






-41-

NOTE 12 – PAYABLES FROM EMPLOYEE BENEFITS

As of 30 June 2013 and 31 December 2012, payables from employee benefits are as follows;

30.06.2013 31.12.2012

Social security premiums payable 404,977 224,552

Due to personnel 825,884 413,876

1,230,861 638,428

NOTE 13 – INVENTORIES

As of 30 June 2013 and 31 December 2012 the details of inventories are as follows;

30.06.2013 31.12.2012

Raw materials 26,331,679 22,200,379

Finished goods 16,874,297 7,901,918

Merchandises 1,162,231 495,727

Other inventories 1,087,582 1,126,834

Provision for diminution in value of inventories (-) (322,020) (152,979)

45,133,769 31,571,879

As of 30 June 2013, the insurance on inventories is amounting to TRY 56,007,107.

For the periods ended at 30 June 2013 and 31 December 2012, the movement schedule of diminution in value

of inventories is as follows;

01.01.-

30.06.2013

01.01.-

31.12.2012

Beginning balance 152,979 -

Reversal of unnecessary provision (-) (81,272) -

Provision set within the period 250,313 152,979

322,020 152,979

As of 30 June 2013 and 31 December 2012 provision for diminution in value of inventories based on

inventory type is as follows;

30.06.2013 31.12.2012

Finished goods 322,020 152,979

322,020 152,979





-42-

NOTE 14 – PREPAID EXPENSES AND DEFERRED INCOME

As of 30 June 2013, and 31 December 2012, the details of prepaid expenses are as follows;

Prepaid expenses short term

30.06.2013 31.12.2012

Order advances given 5,135,942 108,504

Prepaid expenses - short term 1,046,229 1,302,803

Advances given for business purposes 112,883 725

6,295,054 1,412,032

Prepaid expenses long term

30.06.2013 31.12.2012

Advances given for tangible fixed assets 15,899 983,083

Prepaid expenses - Long Term 680,617 843,025

696,516 1,826,108

As of 30 June 2013 and 31 December 2012, the details of deferred income is as following;

Deferred income short term

30.06.2013 31.12.2012

Advances received (*) 18,401,565 10,388,841

Deferred income short term 7,004 -

18,408,569 10,388,841

(*) As of 30 June 2013, TRY 15,116,956 of advances received (31 December 2012: TRY 8,286,842) consists

of notes receivables qualified as sale advances.

Deffered income long term

30.06.2013 31.12.2012

Advances received (**) 4,001,289 1,281,250

Deferred income from long term 3,502 -

4,004,791 1,281,250

(**) All of the advances received consist of notes receivables qualified as sale advances.





-43-

NOTE 15 – TANGIBLE FIXED ASSETS

Movements in tangible fixed assets for the periods ended at the date of 30 June 2013 and 31 December 2012 are as follows:

Costs

31 December

2011 Addition Disposal

Revaluation

funds(*) Transfer

31 December


Revaluation

funds

Additions due

to acquisition

of subsidiary Transfer

30 June

2013

Land 34,670,000 127,507 (1,990,452) (15,877,055) - 16,930,000 151,950 - - - - 17,081,950

Land improvements 483,586 - - 6,225 - 489,811 3,920 - - - - 493,731

Buildings 23,411,280 158,184 - (5,174,823) 1,695 18,396,336 4,930 - - - - 18,401,266

Plants, machinery and

equipment 89,721,217 2,923,228 (213,353) 5,820,288 808,150 99,059,530 15,660,674 - - - 5,906 114,726,110

Vehicles 91,949 44,845 - - - 136,794 56,621 (50,292) - - - 143,123

Fixtures and fittings 7,886,818 1,467,115 (916,497) - (824,792) 7,612,644 1,201,134 (2,090) - 593,392 (5,906) 9,399,174

Leasehold improvements 661,551 103,393 - - 14,947 779,891 199,854 - - 136,213 - 1,115,958

Total 156,926,401 4,824,272 (3,120,302) (15,225,365) - 143,405,006 17,279,083 (52,382) - 729,605 - 161,361,312

Accumulated Depreciation (-)

Land improvements 38,586 1,225 - - - 39,811 625 - 9,505 - - 49,941

Buildings 996,280 184,407 - - 649 1,181,336 92,704 - 97,090 - - 1,371,130

Plants, machinery and

equipment 27,073,042 6,261,180 (81,461) - 441,769 33,694,530 3,410,158 - 1,434,189 - 836 38,539,713

Vehicles 38,593 16,595 - - - 55,188 10,577 (41,491) - - - 24,274

Fixtures and fittings 2,717,898 779,510 (392,528) - (445,283) 2,659,597 466,370 (627) - 102,957 (836) 3,227,461

Leasehold improvements 276,419 140,258 - - 2,865 419,542 93,341 - - 104,927 - 617,810

Total 31,140,818 7,383,175 (473,989) - - 38,050,004 4,073,775 (42,118) 1,540,784 207,884 - 43,830,329

Net Book Value 125,785,583 105,355,002 117,530,983

(*) For the periods ended at 31 December 2012, negative valuation effect is due to sale of lands which had fair value increase in previous periods.





-44-

As of 30 June 2013, the total amount of insurance on tangible fixed assets is amounting to TRY 145,392,886.

Additions due to acquisition of subsidiary contain acquired subsidiary‘s tangible fixed assets for the period

ended at 30 June 2013.

As of 31 December 2012, lands, buildings and machineries, plants and equipments of the Group are revalued

at fair value and reflected in the consolidated financial statements according to the Expert Appraisal Reports

which are prepared by Elit Gayrimenkul Değerleme A.Ş. that is approved by the Capital Market Board. As of

30 June 2013, there is not a new Expert Appraisal Report for Group‘s lands, buildings and machineries, plants



impairment between balance sheet date and appraisal report date. Impairment was calculated with

consideration of mentioned fixed asset‘s remaining useful life.

As of 30 June 2013 there is a mortgage amounting to EUR 41,250,000 in favor of Türkiye Vakıflar Bankası

T.A.O. over Group‘s lands located in Gaziantep/Turkey against the borrowings of the Naksan Holding

Anonim Şirketi which is the shareholder of Group (Note 18) (31 December 2012: EUR 41,250,000).

As of 30 June 2013, amounting to TRY 15,235,653 of plants, machineries and devices of the Group are

acquired with financial leasing method and as of 30 June 2013, net book value of leased fixed assets is TRY

15,002,752 (31 December 2012: acquired to TRY 506,424 – Net book value: TRY 499,672).

For the periods ended at 30 June 2013 and 2012, details of fixed asset purchases from related parties are stated

in Note 7.

NOTE 16 – INTANGIBLE FIXED ASSETS

Movements in intangible fixed assets for the period ended at the date of 30 June 2013 and 31 December 2012

are as follows:

Cost

31 December


31 December

2012 Addition

Additions due to

acquisition of

subsidiary 30 June 2013

Rights (*) 10,729,765 3,814 - 10,733,579 24,469 388,133 11,146,181

Other tangible fixed assets 1,599,659 119,171 (6,000) 1,712,830 59,512 - 1,772,342

Total 12,329,424 122,985 (6,000) 12,446,409 83,981 388,133 12,918,523

Accumulated Depreciation (-)

Rights 3,136,075 1,923,831 - 5,059,906 1,002,124 74,345 6,136,375

Other tangible fixed assets 705,968 87,826 (1,980) 791,814 40,217 - 832,031

Total 3,842,043 2,011,657 (1,980) 5,851,720 1,042,341 74,345 6,968,406

Net Book Value 8,487,381 6,594,689 5,950,117

(*) In the year of 2010, Group has made an agreement with Pls Marka Pazarlama Ticaret Ltd.Şti. For usage

rights of ―Pierre Cardin‖ trademark for ten years and the amount of first five years is TRY 10,592,805

(exclude VAT). As of 30 June 2013, amounting to TRY 6,701,013 (exclude VAT) is classified in notes

payables (Note 10) (31 December 2012: TRY 6,378,386 TL). Remaining balances paid as cash.

Additions due to acquisition of subsidiary contain acquired subsidiary‘s intangible fixed assets for the period

ended at 30 June 2013.

As of 30 June 2013, there is no internally created tangible and intangible fixed assets within Group

(31 December 2012: None).





-45-

NOTE 17 – GOVERNMENT INCENTIVE AND GRANTS

Parent Company made investment valued at TRY 9,547,924 between 01 January 2010 - 31 December 2012.

According to the incentive from Turkish Ministry of Economy, Parent Company was exempted from value-

added tax on investment made. In addition, it has exemption of corporation tax in proportion 40% of related

investment amounts. In addition, Group‘s required by law social security institution 4857 and 5510 for the

period ended 30 June 2013 amounting to TRY 324,209 has received incantive income. (31 December 2012:

206,573 TRY).

NOTE 18 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

As of 30 June 2013 and 31 December 2012 provisions, commitments and contingent liabilities are as follows;

Short term provisions

30.06.2013 31.12.2012

Provision for the law suit 685,266 779,106

685,266 779,106

For the periods ended at 30 June 2013 and 31 December 2012, movement schedule of provision for the law

suit is as follows;

01.01.-

30.06.2013

01.01.-

31.12.2012

Opening balance 779,106 67,616

Provision for the period - 711,490

Payments done in the period (93,840) -

Closing balance 685,266 779,106

Long term provisions


Contingent Assets

Contingent assets of Group are as follows;

Letters of guarantees - As of 30 June 2013, Group has received letters of guarantee amounting to TRY

7,759,000 for its long and short term trade receivables from customers (Note 10) (31 December 2012: TRY

7,300,000). The details of the letters of guarantee based on currency is as below;

Currency

Currency

Amount

TRY

Equivalent

Letters of guarantees TRY 7,759,000 7,759,000

7,759,000





-46-

Mortgages - As of 30 June 2013, Group has received mortgages amounting to TRY 8,640,000 from the

customers for the short and long term trade receivables (Note 10) (31 December 2012 : TRY 10,940,000). The

details of mortgages based on currency are as following;

Currency

Currency

Amount

TRY

Equivalent

Mortgages TRY 8,640,000 8,640,000

8,640,000

Security bonds - As of 30 June 2013, the Group has received security bonds amounting to TRY 10,736,406

from the customers for the short and long term trade receivables (Note 10) (31 December 2012: TRY

3,556,685 ). The details of the security bonds based on currency are as following;

Currency

Currency

Amount

TRY

Equivalent

Security bonds TRY 8,115,000 8,185,000

Security bonds EUR 1,015,000 2,551,406

10,736,406

Contingent Liabilities

As of 30 June 2013 and 31 December 2012 guarantee / security / mortgage (―GSM‖) of the Parent Company

are as follows:

Given GSM (Guarantee-Security-Mortgage) by Parent Company 30.06.2013 31.12.2012

A. Total Amount of GSM given on behalf of legal entity 1,250,806 1,361,378

B. Total Amount of GSM given for partnerships which are included in

full consolidation None None C. Total Amount of GSM given for the purpose of guaranteeing third

party loans to carry the regular trade activities None None

D. Total Amount of other GSM given 103,690,125 97,007,625

I. Total Amount of GSM given for the Parent Company 103,690,125 97,007,625

ii. Total Amount of GSM given for Other Group Companies not

included in B and C clauses None None

iii. Total Amount of GSM given for third parties not included in C

clause None None

104,940,931 98,369,003

Ratio of other GSM given by the Parent Company to Shareholders‘ Equity as of 30 June 2013 is 56% (31

December 2012: 71%).





-47-

The details of Group‘s contingent liabilities are as follows;

Letters of guarantees – As of 30 June 2013, Group has given letters of guarantee amounting to TRY

1,250,806 to various parties (31 December 2012: TRY 1,361,378). The details of the letters of guarantees are

as fallows;

30.06.2013 31.12.2012

Custom authorities 1,087,256 1,172,635

Other corporations 163,550 188,743

1,250,806 1,361,378

As of 30 June 2013, the details of the letters of guarantees based on banks and currencies are as follows;

Currency

Currency

Amount

TRY

Equivalent

Alternatif Bank A.Ş. TRY 571,045 571,045

Türkiye İş Bankası A.Ş. EUR 17,325 43,550

T.C. Ziraat Bankası A.Ş. TRY 406,647 406,647

Türkiye Halk Bankası A.Ş. TRY 67,123 67,123

Kuveyt Türk Katılım Bankası A.Ş. TRY 162,441 162,441

1,250,806

As of 31 December 2012, the details of the letters of guarantees based on banks and currencies are as follows;

Currency

Currency

Amount

TRY

Equivalent

Alternatif Bank A.Ş. TRY 910,434 910,434

Türkiye İş Bankası A.Ş. EUR 17,325 40,743

T.C. Ziraat Bankası A.Ş. TRY 148,000 148,000

HSBC Bank A.Ş. EUR 111,494 262,201

1,361,378





-48-

Mortgages – As of 30 June 2013, there is mortgage over Group‘s lands with the amount of EUR 41,250,000,

TRY equivalent of related amount is TRY 103,690,125, against the borrowings of the Naksan Holding

Anonim Şirketi which is the main shareholder of Group (31 December 2012: TRY 97,007,625). The detail of

the mortgages is as follows;

Mortgage given to:

Location of

land Degree EUR

Türkiye Vakıflar Bankası T.A.O. Gaziantep 1/0 41,250,000

41,250,000

Indorsed notes receivables – As of 30 June 2013, note receivables which are received from customers are

indorsed to Naksan Holding Anonim Şirketi; who is a shareholder of Group with the amount of

TRY 85,000 to Naksan Plastik ve Enerji Sanayi ve Ticaret Anonim Şirketi, who is a related party of Group

with the amount of TRY 1,157,191 and to various suppliers with the amount of TRY 7,463,061 adding up to

an amount of TRY 8,705,252 (31 December 2012: Naksan Holding Anonim Şirketi: TRY 22,273,882,

Naksan Plastik ve Enerji Sanayi ve Ticaret Anonim Şirketi: TRY 243,000 and various suppliers:

TRY 1,785,663; in total: TRY 24,302,545).

Litigation – Group, from time to time is defendant in law suits related business issues. As of 30 June 2013 all

the lawsuits brought against Group are about personnel. Related risks have been analyzed as to likelihood of

occurrence. As a result of these analyses, as of 30 June 2013, Group management made provision for cases at

an amount of TRY 685,266 (31 December 2012: TRY 779,106).





-49-

NOTE 19 – COMMITMENTS

Group has amounting to TRY 2,692,545 export commitments to the banks for the export borrowings (Note 8)

(31 December 2012: TRY 4,134,000).

Bank name

Maturity

of commitments

Currency

type

Currency

Amount TRY Equivalent

Türkiye İş Bankası A.Ş. In the year of 2015 EUR 500,000 1,256,850

Turkey İş Banks A.Ş. In the year of 2014 EUR 150,000 377,055

Türkiye İş Bankası A.Ş. In the year of 2014 USD 150,000 288,720

T.C. Ziraat Bankası A.Ş. In the year of 2014 USD 400,000 769,920

2,692,545

As of 31 December 2012, details of the export commitments are as follows:

Bank name

Maturity

of commitments

Currency

type

Currency

Amount TRY Equivalent

Turkey Garanti Banks A.Ş. In the year of 2013 USD 1,000,000 1,782,600

Türkiye İş Bankası A.Ş. In the year of 2013 EUR 1,000,000 2,351,700

4,134,300

The Parent Company's Board of Directors, with the decree of 25 on 3 April 2013 in Borsa Istanbul A.Ş.

shares of Royal Halı at the start of trading on 3 May 2013 from the date of the 180 (one hundred eighty) days,

- Not to any paid capital increase and thereby not increasing the amount of shares in circulation,

- Not the make any other decisions which would result to make a new sale and public offering or to increase

the amount of shares in circulation during this time,

- They made a commitment not to make any other statements which would results to make a new sale and

public offering or to increase the amount of shares in circulation during this time.





-50-

NOTE 20 – PROVISIONS FOR EMPLOYEES BENEFITS

The severance pay provision has been calculated as expressed in Note 2. As of 30 June 2013, the liability is

calculated on a thirty day wage base with a maximum of TRY 3,129 for each year of service, utilizing the

rates on date of retirement or departure (31 December 2012: TRY 3,034).

For the period ended in 30 June 2013 and 31 December 2012, based on mentioned principles above, Group

reflected severance pay liabilities which was reduced to the date of balance sheet by the using expected

inflation rate and real discount rate to consolidated financial statements. All gain and losses other than

calculated actuarial gain/ (losses) in the consolidated income statement, Actuarial gain / (losses) are shown in

the consolidated statement of changes in equity.

30.06.2013 31.12.2012

Discount rate 8.50% 10.00%

Inflation rate 5.00% 6.07%

Real discount rate 3.33% 3.71%

Group does not provide any other employee benefit other than the reserve for retirement pay described above.

The movement schedule of severance pay provision is as follows:

01.01.-

30.06.2013

01.01.-

31.12.2012

Balance of 01 January 837,992 637,971

Additions due to business merger 29,572 -

Severance pay paid in the period (65,438) (8,197)

Cost of services 107,885 193,467

Interest cost 33,953 45,480

Actuarial profit / (loss) 15,352 (30,729)

Closing balance 959,316 837,992

NOTE 21 – OTHER ASSETS AND LIABILITIES

As of 30 June 2013 and 31 December 2012 the details of other assets and liabilities are as below;

Other Current Assets

30.06.2013 31.12.2012

VAT carried forward 1,832,508 1,341,080

1,832,508 1,341,080

Other Non-Current Assets


Other Current and Non-Current Liabilities






-51-

NOTE 22 – SHAREHOLDERS’ EQUITY, RESERVESAND OTHER EQUITY COMPONENTS

22.1 Paid in Capital

As of 30 June 2013, Parent Company‘s share capital consists of 60,000,000 unit shares each valued at TRY 1.

As of 30 June 2013 and 31 December 2012 the capital structure is as follows:


Shareholders Ratio

Amount

(TRY) Ratio

Amount

(TRY)

Naksan Holding Anonim Şirketi 46.25% 27,750,000 70.00% 35,000,000

Public Shares 28.75% 17,250,000 - -

Osman Nakıboğlu 9.00% 5,400,000 10.80% 5,400,000

Cahit Nakıboğlu 6.25% 3,750,000 7.50% 3,750,000

Bahaeddin Nakıboğlu 3.00% 1,800,000 3.60% 1,800,000

Cihan Dağcı 2.08% 1,250,000 2.50% 1,250,000

Emre Nakıboğlu 2.00% 1,200,000 2.40% 1,200,000

Ferhan Nakıboğlu 1.25% 750,000 1.50% 750,000

Mehmet Hilmi Nakıboğlu 1.00% 600,000 1.20% 600,000

Taner Nakıboğlu 0.42% 250,000 0.50% 250,000

Total 100.00% 60,000,000 100.00% 50,000,000

The Parent Company, the Capital Markets Board dated 19 March 2013 and in 2758 was with the permission

of the registered capital system. The Parent Company's registered capital ceiling of TRY 200,000,000, TRY

60,000,000 of the Company's issued share capital is fully paid share capital committed by the shareholders.

Naksan Holding A.Ş and Nakıboğlu family who owned group A shares a nominal value of TRY 5,000,000

have a privilege to determine members of the boards of directors and use the group‘s voting rights under the 8

and 11 of the articles of Association. Group B shares that offered to the public, does not have a privilege. 8 of

the Articles of Association Board of Directors consist of six members and three members elected by the

General Assembly from among the candidates nominated by Group A shareholders. According to the 11 of

the Articles of Association, in the Ordinary and Extraordinary General Assemblies of the Company, each

Group A shareholders has 15 (fifteen) and each Group B shareholders has 1 (one) voting rights. However,

according the Turkish Commercial Law numbered 6102 479/3 of the articles, Privilage right does not use to

make decisions in the General Assembly regarding to file acquiattance and obligation cases with the cange of

the articles of association.

22.2 Inflation Adjustment of Shareholders’ Equity

As of 30 June 2013 and 31 December 2012 the details of inflation adjustment to shareholders‘ equity are as

below;

30.06.2013 31.12.2012

Inflation adjustment of shareholder‘s equity 746,913 746,913

746,913 746,913





-52-

22.3 Share Premiums Discounts

Share premiums account, which express to be obtained by cash inflow as a result of sale of Parent Company‘s

shares within market prices.These premiums are shown under equity and not to be subject to dividend

distribution but can be used in capital increases in the future.

The parent company comprised premium related to the shares with the amount of TRY 34,500,000 by selling

10.000.000 share, one of whose has the TRY 1 value, with the unit price of TRY 4.45 in the Borsa İstanbul

A.Ş by providing capital increase. TRY 3,100,029 which is the Company‘s total cost of public offerings, is

accounted with the condition of reduction on premium amount related to the shares. The detail related to the

account is as follows;

30.06.2013 31.12.2012

Premiums from the sale of shares in Borsa İstanbul A.Ş. 34,500,000 -

Expenses relevant to the public offering process (4,210,391) -

Paert of the amount of reflected to shareholders which expenses relevant to

the public offering process (Note 7) 1,110,362 -

31,399,971 -

22.4 Actuarial Profit/ (loss) of the Calculation Severance Pay Provision

The group, reflected the detail which is based on the principles described in note 20, the expected inflation

rate and the real discount rate is calculated using the balance sheet by reducing the day reflected the

termination indemnity liability to the Consolidated financial statements, which are belonging to ending period

at the date of 30 September 2013 and 31 December 2012.All of profits and losses except calculated actuarial

profit / (loss) was shown in consolidated statements of income, actuarial profit / (loss) was shown in

consolidated statements of changes in equity.

30.06.2013 31.12.2012

Actuarial profit / (loss) of the calculation severance pay provision 190,602 178,940

190,602 178,940

22.5 Effect of business mergers subject to joint control and joint ventures

As of 30 June 2013 and 31 December 2012 the details of relevant account are as following;

30.06.2013 31.12.2012

Effect of business mergers subject to joint control and joint ventures 2,390,557 -

2,390,557 -

Royal Halı İplik Tekstil Mobilya Sanayi ve Ticaret Anonim Şirketi (―Royal Halı‖) acquired 51% of shares of

Atlas Halı Aksesuar ve Mobilya Sanayi Ticaret Anonim Şirketi with the amount of TRY 2,550,000 in 29

January 2013. The acquisition value of acquired company was accounted as a separate item in consolidated

financial statements within equity since the related amount is more than TRY 2,390,557 from the fair value of

the company‘s share of identifiable assets, liabilities and contingent liabilities. The details for the calculation

of relevant amount is in Note 4.





-53-

22.6 Revaluation Funds

Revaluation funds are comprised from the buildings, lands, facilities, devices and machineries over indexed

value and the deferred tax calculated from the value exceeding indexed value. Buildings, lands and

machineries are stated in the financial statements at expertise value determined by Elit Gayrimenkul

Değerleme Anonim Şirketi, which is accredited by Capital Market Board as of 31 December 2012. As of 30

June 2013, there is not a new Expert Appraisal Report for Group‘s lands, buildings and machineries, plants



impairment between statement date and appraisal report date. Impairment was calculated with consideration

of mentioned fixed asset‘s remaining useful life.

The details of the revaluation funds are as following:

30.06.2013 31.12.2012

Expertise values over indexed value 43,080,155 44,620,939

Deferred tax liabilities (4,948,357) (5,240,525)

Total revaluation fund 38,131,798 39,380,414

22.7 Restricted Reserves

In the legal book, the accumulated profits can be distributed except the claim related legal reserves stated below.

According to the Turkish Commercial Code, legal reserves consist of first and second legal reserves. The first

legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a

maximum of 20% of the Company‘s share capital. The second legal reserve is appropriated at the rate of 10%

of all distributions in excess of 5% of the Company‘s share capital. The first and second legal reserves are not

available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the

event that the general reserve is exhausted. The statutory accumulated profits and statutory current year profit

are available for distribution, subject to the reserve requirements referred to above.

As of 30 June 2013 and 31 December 2012 details of legal reserves assorted from profit are as following;

30.06.2013 31.12.2012

Restricted Reserves 2,972,851 1,116,622

2,972,851 1,116,622





-54-

22.8 Retained Earnings / Losses

In accordance with the communiqué Serial: XI No: 29, effective from 1 January 2008, and its related

announcements, ―Paid-in Share Capital‖, ―Restricted Reserves Appropriated from Profit‖ and ―Share

Premium‖ should be presented with statutory amounts. The restatement differences arise during the

application of the communiqué should be presented in ―Adjustment to Share Capital‖, if the difference is

resulted from paid-in share capital and has not added to capital yet; should be presented in ―Retained Earnings

/ Losses‖, if the difference is resulted from ―Restricted Reserves Appropriated from Profit‖ and ―Share

Premium‖ and has not been subject to profit distribution or has not added to capital yet.

According to the decision dated 30 December 2003 and numbered 66/1630 of Capital Market Board,

―Previous Year‘s Losses‖ account which arises from first time application of inflation adjustment on financial

statements is taken into consideration as deductible item, during the calculation of distributable profit for the

inflation adjusted financial statements under the profit distribution principles of the Capital Market Board.

Nonetheless, it is also possible to set off ―Previous Year‘s Losses‖ with the Company‘s current profit and

accumulated profit. The remaining part of prior year‘ loss is possibly set off extraordinary reserves, legal

reserves and inflation effect on shareholder‘s equity account, respectively.

In accordance with Turkish Commercial Code, legal reserves consist of first and second legal reserves. Until

the Company‘s legal reserve reaches 20% of the nominal paid-up share capital, legal reserves are set aside as

the first 5% of net income. The second legal reserve, on 5% of the Company‘s share capital is divided into

10% of all profits from the distribution. According to the Turkish Commercial Code, legal reserves for

distribution unless they exceed 50%, but can be used to offset losses at the point of profit reserves have been

exhausted.

Listed companies are subject to dividend requirements regulated by the CMB as follows:

In addition, based on the CMB Decree 7/242, dated 25 February 2005, if the amount of profit distributions

calculated in accordance with the net distributable profit requirements of the CMB does not exceed the

statutory net distributable profit, the whole amount of distributable profit should be distributed. If it exceeds

the statutory net distributable profit, the whole amount of the statutory net distributable profit should be

distributed. It is stated that dividend distributions should not be made if there is a loss in either the financial

statements prepared in accordance with CMB regulations or in the statutory consolidated financial statements.

In accordance with CMB decision No:1/6 dated January 9, 2009; with regard to the determination of

principles to be followed regarding distribution of profits obtained from 2008 activities by the publicly held

incorporated companies, the shares of which are traded on the exchange market, the minimum profit

distribution rate of 20% shall be applied as indicated in Article 5 of the Communiqué No:27 Series: IV; this

distribution shall be performed by distributing the shares to be exported by means of adding cash or dividend

to the capital in accordance with the decision of general assemblies, to the shareholders free of charge or by

distributing certain amount in cash and certain amount in free shares. Again, in accordance with the decision

mentioned above, as long as in the calculation of profit distributable by the enterprises obliged to prepare

consolidated financial table, the profit amounts appearing in the profit in the consolidated financial tables and

transferred from subsidiaries, enterprises and associates under joint management to consolidated financial

tables of the parent company are met from the resources in the legal records of the companies, the profit

amount to be distributed shall be calculated considering the net current profits in the financial tables to be

prepared and disclosed in the frame of CMB‘s ―Communiqué on Principles regarding Financial Reporting in

Capital Market‖ No: 29 Series: XI, regardless of the profit distribution decision made by general assemblies.





-55-

In accordance with the CMB decision dated 27 January 2010, it‘s decided to remove the obligation related

with the minimum dividend distribution rate for publicly traded companies.

Inflation adjustment to shareholders' equity and book value of extraordinary reserves can be used as an

internal source in capital, dividend distribution in cash or net-off against prior years‘ loss. In case the inflation

adjustment to shareholders‘ equity is used for dividend distribution in cash, the distribution is subject to

corporate tax.

22.9 Minority Interests

As of 30 June 2013 and 31 December 2012 details of minority interests are as follows;

30.06.2013 31.12.2012

Capital 2,450,000 -

Retained earnings/(losses) (2,297,430) -

Profit / (loss) for the period, net (249,111) -

(96,541) -





-56-

NOTE 23 – SALES AND COST OF SALES

23.1 Sales

Details of sales for the periods ended at 30 June 2013 and 2012 are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012 Domestic Sales

BCF yarn sales 1,926,085 6,494,082 1,509,491 4,282,094

Machine carpet sales 51,940,223 48,761,342 28,090,456 26,424,773

Raw material sales (PP and Yarn) 1,381,593 3,670,115 945,040 1,815,246

Merchandise sales 5,631,164 1,371,440 1,997,678 167,068

Other sales 101,917 281,422 51,077 247,158

60,980,982 60,578,401 32,593,742 32,936,339

Export Sales

BCF yarn sales 43,532,254 34,358,190 22,514,373 17,729,238

Machine carpet sales 10,847,575 10,394,250 6,214,468 5,341,075

Merchandise sales 7,495,343 8,428,927 3,786,732 3,902,506

Other sales - 194,151 - 194,151

61,875,172 53,375,518 32,515,573 27,166,970

Sales returns and discounts (5,961,382) (3,257,407) (2,475,877) (2,143,566)

116,894,772 110,696,512 62,633,438 57,959,743

For the periods ended at 30 June 2013 and 2012, details of amount of sales are as following;

01.01. - 30.06.2013 01.01. - 30.06.2012

Type of product Unit Amount Unit Amount

Machine Carpet m² 1,080,960 m² 1,032,922

Commercial Carpet m² 37,200 m² 34,317

BCF Yam kg 8,657,802 kg 8,056,461

For the period ended at 30 June 2013, amounting to TRY 44,985,463 of export registered sales is classified to

export sales (01 January – 30 June 2012: TRY 26,606,718).

Sales to related parties which are classified under sales account are indicated in Note 7.





-57-

23.2 2 Cost of Sales

Details of cost of sales for the periods ended at 30 June 2013 and 2012 are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Direct material expenses 53,653,889 55,926,972 29,413,815 29,162,416

Direct labor expenses 5,304,002 2,980,615 2,928,125 1,483,243

General production overheads expenses 9,052,089 7,007,542 5,089,704 3,782,788

Depreciation and amortization expenses 4,586,787 4,267,048 2,409,741 2,130,175

Cost of Finished Goods Produced 72,596,767 70,182,177 39,841,385 36,558,622

Changes in finished goods inventory

1. Beginning inventory (+) 7,901,918 10,240,557 7,901,918 10,240,557

2. Ending inventory (-) (16,874,297) (14,950,898) (16,213,743) (11,850,554)

Cost of finished goods sold 63,624,388 65,471,836 31,529,560 34,948,625

Cost of merchandise

1. Beginning merchandise inventory (+) 495,727 590,881 495,727 590,881

2. Additions due to business merger(+) 4,916,325 - - -

3. Purchases during the period (+ ) 13,371,901 14,957,762 6,142,094 5,719,106

4. Ending merchandise inventory (- ) (1,162,231) (1,705,315) 5,339,943 352,843

Cost of merchandise sold 17,621,722 13,843,328 11,977,764 6,662,830

Cost of sales, net 81,246,110 79,315,164 43,507,324 41,611,455

For the periods ended at 30 June 2013 and 2012, details of amount of production are as following;

01.01. - 30.06.2013 01.01. - 30.06.2012

Type of product Unit Amount Unit Amount

Machine Carpet m² 1,216,369 m² 1,071,096

BCF Yarn kg 8,828,624 kg 8,628,174

Purchases from related parties which are classified under cost of sales account indicated in Note 7.





-58-

NOTE 24 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING, SELLING AND

DISTRIBUTION EXPENSES AND RESEARCH AND DEVELOPMENT EXPENSES

For the periods ended at 30 June 2013 and 2012, marketing, selling and distribution, general administrative

and research and development expenses are mentioned below;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

General administrative expenses 3,911,389 3,693,222 2,062,127 1,768,117

Marketing, sale and distribution expenses 14,912,895 12,462,112 6,602,613 6,219,716

Research and development expenses 79,526 53,490 48,963 36,967

18,903,810 16,208,824 8,713,703 8,024,800

NOTE 25 – EXPENSES ACCORDING TO QUALIFICATIONS

25.1 General administrative expenses

Details of General administrative expenses for the periods ended at 30 June 2013 and 2012 are as following;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Representation and accomodation expenses 105,529 27,165 57,465 16,426

Personnel expenses 1,704,390 773,087 935,535 364,205

Communication expenses 61,627 9,254 49,056 4,197

Rent expenses 151,689 - 22,355 -

Provision for court cases - 288,056 - 288,056

Travel expenses 51,027 19,663 34,961 4,779

Depreciation and amortization expenses 122,472 30,558 53,207 16,502

Provision for diminution in value of inventories 250,313 - 34,683 -

Provision for doubtful expenses 200,316 1,892,288 63,444 673,619

Provision for severance pay 76,400 67,389 55,850 34,445

Consultancy expenses 152,643 111,651 26,643 81,968

Donation expenses 287,888 422,581 165,116 265,490

Taxes and duties 574,474 15,246 558,786 11,989

Other expenes 172,621 36,284 5,026 6,441

3,911,389 3,693,222 2,062,127 1,768,117





-59-

25.2 Marketing, selling and distribution expenses

For the periods ended at 30 June 2013 and 2012, details of marketing, selling and distribution expenses are as

following;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Fair expenses 785,488 347,695 21,854 109,113

Personnel expenses 965,436 80,760 492,028 45,840

Transportation expenses 764,324 536,307 461,531 236,960

Insurance expenses 664,787 691,039 248,945 372,505

Export and custom expenses 146,126 188,549 79,788 94,022

Advertising expenses 2,932,110 1,405,637 1,129,894 450,992


Sales premium expenses 6,708,861 7,838,391 3,483,163 4,565,114

Travel expenses 196,219 60,191 132,795 43,867

Representation and accomodation expenses 360,151 249,271 27,462 11,129

Rent expenses 459,936 228,196 240,869 99,825

Other expenses 536,860 482,452 115,173 10,058

14,912,895 12,462,112 6,602,613 6,219,716

25.3 Research and development expenses

For the periods ended at 30 June 2013 and 2012, the details of research and development expenses are as

follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Personnel expenses 55,053 23,653 30,417 12,130

Travel expenses 7,773 - 6,846 -


Other expenses 2,440 19,837 2,440 19,837

79,526 53,490 48,963 36,967





-60-

NOTE 26 –OTHER OPERATING INCOME / (EXPENSES)

Details of other operating incomes for the periods ended at 30 June 2013 and 2012 are as following;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Foreign exchange income from commercial

operations 2,206,153 7,354,401 1,703,473 3,623,349

Rediscount income 1,827,373 3,251,420 (21,714) (124,527)

Due date differences income from trade

receivables 28,738 19,441 1,172 12,444

Insurance income 274,153 89,859 67,536 -

Rent income 62,000 3,000 62,000 3,000

Other incomes 16,533 205,998 9,969 7,435

4,414,950 10,924,119 1,822,436 3,521,701

The details of main operating other expense and loss for the periods ended at 30 June 2013 and 2012 is as

following;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Rediscount expense (2,620,176) (2,777,268) (734,149) (511,063)

Foreign exchange expense from commercial

operations (2,892,216) (7,246,236) (2,474,301) (3,996,048)

Other expenses (5,431) (242) (3,217) (64)

(5,517,823) (10,023,746) (3,211,667) (4,507,175)

Details of expenses from related parties classifies in other operating income / (expenses) account for the

periods ended at 30 June 2013 and 2012 indicated in Note 7.

NOTE 27 - INVESTMENT ACTIVITIES INCOME/ EXPENSES

Details of Investment activities income for the periods ended at 30 June 2013 and 2012 are as following;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Loss on sale of fixed assets 37,810 - - -

Interest income from other receivables 20,416 401,378 20,416 323,694

58,226 401,378 20,416 323,694

For the periods ended at 30 June 2013 and 2012 details of interest incomes to related parties are indicated in

Note 7.





-61-

Details of Investment activities expense for the periods ended at 30 June 2013 and 2012 are as following;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Loss on sale of fixed assets (175) - (175) -

Interest expense to other payables (124,008) (136,280) (52,203) (87,163)

(124,183) (136,280) (52,378) (87,163)

For the periods ended at 30 June 2013 and 2012 details of interest expenses to related parties are indicated in

Note 7.

NOTE 28 – FINANCE INCOME / EXPENSES

For the periods ended at 30 June 2013 and 2012 financial incomes are as follows:

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Foreign exchange gains 767,652 9,144,462 556,423 2,097,743

767,652 9,144,462 556,423 2,097,743

For the periods ended at 30 June 2013 and 2012 financial expenses are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Interest paid on loans (955,629) (2,089,546) (332,679) (1,119,554)

Foreign exchange losses (2,319,939) (2,658,687) (1,845,574) (1,715,952)

Letter of guarantees commission expenses (41,475) (96,172) (30,321) (78,577)

Other finance expenses (81,596) (12,378) (64,943) (586)

(3,398,639) (4,856,783) (2,273,517) (2,914,669)

For the periods ended at 30 June 2013 and 2012 details of financial expenses to related parties are indicated in

Note 7.

NOTE 29 – NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Parent Company acquired two lands for the trade receivables from its customer with the amount of

TRY 3,296,250. The Group has not calculated provision for impairment for the lands, because the fair value of

the lands, which is calculated by TSKB Gayrimenkul Değerleme A.Ş. that is approved by CMB, are higher than

the cost amounts of the lands.





-62-

NOTE 30 –TAX ASSETS AND LIABILITIES

Deferred Taxes

The potential deferred tax assets / (liabilities) of the Company represents the tax effects of temporary

differences, arising between the financial statements reported for IFRS purposes and the statutory tax financial

statements. Such differences arise due to the different treatment of certain items of income and expense

included in the IFRS financial statements compared to the local tax return, in accordance with applicable tax

laws.

As of balance sheet date, accrued temporary differences and deferred tax assets and liabilities prepared by

using current tax rates are as following:


Cumulative

temporary

difference Deferred Tax

Cumulative

temporary

difference Deferred Tax

Deferred Tax Assets:

Tax incentive

-discounted tax rate 18,360,140 2,937,622 20,143,330 3,222,933

Taxable losses 6,940,659 1,388,132

Retirement pay provision 959,316 191,863 837,992 167,598

Unearned interests on receivables 1,731,221 346,245 1,199,496 239,899

Provision for doubtful receivables 6,795,416 1,359,083 6,626,901 1,325,380

Accrued interest expenses on loans - - 14,031 2,806

Provision for diminution in value of inventories 322,020 64,404 152,979 30,596

Provision for law suit 685,266 137,053 779,106 155,821

Expense accruals 228,473 45,695 - -

Reversal of research expenses capitalization 255,940 51,188 189,655 37,931

Foreign exchange losses 2,271,068 454,218 1,352,388 270,478

Deferred tax assets 6,975,503 5,453,442

Deferred Tax Liabilities:

Capitalization of expenses (497,250) (99,450) (567,639) (113,528)

Depreciation and indexation differences of lands and buildings (153,694) (7,685) (138,529) (6,926)

Depreciation and indexation differences of tangible and intangible

fixed assets (Except land, land improvements and buildings) (22,565,178) (4,513,036) (22,146,419) (4,429,284)

Unearned interest on payables (612,975) (122,595) (779,481) (155,896)

Fair value adjustment for lands and buildings (24,451,159) (1,222,558) (24,557,754) (1,227,888)

Fair value adjustment for machinery and plants (18,628,996) (3,725,799) (20,063,185) (4,012,637)

Foreign exchange gains (147) (29) (6,830) (1,366)

Income accruals (1,054) (211) - -

Deferred Tax Liabilities (9,691,363) (9,947,525)

Deferred tax assets / (liabilities), net (2,715,860) (4,494,083)





-63-

For the periods ended at 30 June 2013 and 2012 tax income / (expense) on income statement are as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

01.04.-

30.06.2013

01.04.-

30.06.2012

Net Income / (Expense) for the period (3,442,062) (3,621,386) (1,861,080) (1,364,209)

Deferred Tax Income / (Expense) 319,020 (163,571) (82,768) (81,401)

Tax income / (expense), net (3,123,042) (3,784,957) (1,943,848) (1,445,610)

As of 30 June 2013 and 2012 the movements of deferred tax assets and liabilities are as follows:

01.01.-

30.06.2013

01.01.-

30.06.2012

Opening balance 4,494,083 6,245,136

Deferred tax recognized in equity (295,238) (133,093)

Deffered tax effect of business mergers subject to joint control (1,163,965) -

Deferred tax assets / (liabilities), net (2,715,860) (6,275,614)

Deferred tax income / (expense), net 319,020 (163,571)

As of 30 June 2013, the carry forward taxables losses of Group‘s related parties and the last periods of that

this losses could be used are as below;

The last period of using taxable losses

Period financial

loss occurred

Deferred

taxable losses

2016 2011 1,449,553

2017 2012 4,660,667

2018 2013 830,439

Total 6,940,659





-64-

Tax provision reconciliation shown in Group‘s income statement is as follows;

01.01.-

30.06.2013

01.01.-

30.06.2012

Unaudited profit / (loss) before tax (*) 18,542,108 18,251,670

Total additions to tax base 379,971 434,119

Total deductions from tax base 285,217 3,329,944

Discounted to corporate tax base 1,783,189 -

Unaudited financial profit / (loss) 18,636,862 15,355,845

Corporate tax rate 20% 20%

Calculated tax 3,442,062 3,071,169

Stoppage tax effect of tax incentive - 550,217

Corporate tax provision in the income statement 3,442,062 3,621,386

(*) Companies covered by the full consolidation calculated on the basis of the tax provision. For the

companies that tax for the period do not occur, reconciliation of the tax provision is not presented.

As of 30 June 2013 and 31 December 2012, Group‘s assets relevant current period tax is as following;

30.06.2013 31.12.2012

Prepaid taxes 1,580,982 4,708,498

1,580,982 4,708,498





-65-

Corporation Tax

Group is liable to corporation tax valid in Turkey. The necessary provisions are made on the attached

financial statements for expected tax liabilities related to the Group‘s current period activity results.

Corporation tax rate that will be accrued over corporation tax base is calculated over the tax base that remains

after adding expenses recorded as expense in determination of commercial earnings that are nondeductible

from tax base and subtracting tax-exempt profit, tax- free income and other deductions (if there are losses

from previous years and used investment allowances if preferred).

The applied effective interest rate in 2013 is 20% (2012: 20%).

Permanent tax is calculated and accrued quarterly in Turkey. As of temporary tax periods, the effective

corporation tax rate is 20% in 2013 (2012: %20).

There is no absolute and certain confirmation procedure related to tax evaluation in Turkey. Companies

prepare their tax return between 1-25 Aprils coming after the related year‘s balancing period (for the

companies having special account period, between 1st and 25th of fourth month following the closing of

period). These tax returns and related accounting records may be inspected and changed by tax department in

five years.

There are some exceptions on Corporation Tax Law. These exceptions that company will possibly utilize are

explained as below;

Taxable losses

According to Turkish Tax Legislation, deduction of financial losses which are decelerated on financial

statements, are possible to deduct from profit of the company with the condition not exceeding 5 years.

However, financial losses are not possible to be set-off from previous year profits.

Issue Premium Exception

The Premium income provided by the disposing of stocks, formed whiles the establishments of Incorporated

Companies or while increasing their capital, below their nominal values is an exemption from Corporation

tax.

The Real Estate and Subsidiary Share Sales Gain Exemption

The 75 % of income of corporations composed of subsidiary shares, real estates, privilege, and promoter‘s

stock and perpetual bonds are exemptions of Corporation tax. In order to benefit from exemption, the

questioned income should be kept in a fund account in liabilities and should not be removed of operation

during 5 years. The sale price should be received at the end of the following 2nd calendar year. Corporations

getting income from the sale of such kind of values they own, like Stocks and bonds and real estate trading

and renting are beyond the scope of exemption.

Investment Allowance Exemptions

Post abolishment of the law numbered 5479, temporary 69th article is added to Income Tax Legislation

related investment allowance.





-66-

According to this execution, Income and Corporation Taxpayers;

a. As of 31 December 2005, its existence is subject and the investment allowance amount that was not able to

be deducted from 2005 earnings,

b. In the extent of investment incentive certificate which were issued and based on the application before 24

April 2003, ante abolishment of Income Tax Legislation numbered 193 and dated 09 April 2003 and law

numbered 4842, in the extent of certificate the commenced investment projects relying on 1, 2, 3, 4, 5 and 6th

the article of appendix and the ones commenced after 01 January 2006,

c. In the extent of abolished 19th article of Income Tax Legislation numbered 193, they started investments

prior to 01 January 2006, in terms of economical and technical completeness the ones started post the date,

In terms of regulatory provisions effective on 31 December 2005, calculated amounts of exemptions from

investment allowances, again in the extent of legal provisions valid on 31 December 2005 (including tax rate

related legal provisions) was deducted merely from earnings of 2006, 2007 and 2008. However, with the

decision numbered 2006/95, which was taken during the meeting of the Constitutional Court on 15 October

2009, the phrase ― ... only related to the years 2006, 2007 and 2008…‖ which was a part of the Temporary

Article 69 of the Income Tax Law was cancelled and the cancellation became effective from the date the

decision has been published in the Official Gazette on 8 January.2010. According to the decision, the

investment incentive amount outstanding that cannot be deducted from 2008 taxable income previously will

be deducted from taxable income of the subsequent profitable years.

Regarding the cancellation decision taken by the Constitutional Court, an amendment was made in the 69th

article in Income Tax Regulation using the regulation numbered 6009 and dated 23/07/2010. Consequently, in

compliance with the cancellation decision of the Constitutional Court, the year limitation has been abolished

and investment allowance has been limited to 25% of the profit. Corporate tax ratio of 30% in the previous

regulation for the ones who benefit from investment allowance has been decreased to the effective corporate

tax with the amendment made (2010: 20%).

Within the frame of the Communiqué ―Decision regarding Government Incentive Assistance in Investment‖

dated 16 July 2009 and numbered 2009/01, newly investing companies are held subject to investment

incentives based on the some regions.

Investment incentives and grants are; discount in corporation and income taxes (differs from region to region),

provision for the investment, interest support.

Royal Halı İplik Tekstil ve Mobilya Sanayi ve Ticaret Anonim Şirketi is qualified for the investment

incentives stated above due to the current and future investment expenditures. The investment area is within

the 3rd Region according to the communiqué numbered 2009/01; so the Company is qualified for 80%

discount on corporation tax rate, which reduces corporation tax rate to 4% in accordance with Communiqué,

40% of total investment expenditures will be deducted from accrued corporation tax amount in the coming

periods.

Withholding Tax

In addition to Corporation tax, it is required to calculate withholding tax from the dividends distributed by full

pledge taxpayer enterprise and include in its income tax base and except dividends distributed by foreign

companies to its subsidiary in Turkey. As of 23 July 2006 income tax stoppage rate was altered to 15%.

Dividends that are added to capital without distribution are not subject to income tax stoppage. It is necessary to

make tax withholding at 19.8% over investment allowance balance utilized based on investment incentive

certificate received prior to 24 April 2003. 40% of company activities directly related to production investment

certificate. Investment expenses made after this date can be deducted. Tax withholding cannot be made on

investment expenses without incentive certificate.





-67-

NOTE 31 – EARNINGS PER SHARE

For the periods ended at 30 June 2013 and 2012 profit / (loss) per share whose nominal value is TRY 1 is as

follows:

01.01.-

30.06.2013

01.01.-

30.06.2012

Net profit / (loss) for the period 9,821,993 16,851,226

Net Profit/(loss) relevant to minority interests 249,111 -

Net profit (loss) 10,071,104 16,851,226

Total number of shares outstanding 60,000,000 50,000,000

Profit/ (loss) per share (TRY ) 0.16 0.34

NOTE 32 – EXPOSURE TO FINANCIAL RISKS DUE TO FINANCIAL INSTRUMENTS

Financial Instruments

Credit Risk

The company is subject to credit risk arising from trade receivables related to credit sales and deposits at

banks. These risks are managed by limiting the aggregate risk from any individual counterparty and obtaining

sufficient collateral where necessary and making only cash based sales to customer considered as having a

higher risk. Collect ability of trade receivables are evaluated by management depending on their past

experiences and current economic condition, and presented in the financial statements net of adequate

doubtful provision.





-68-

As of 30 June 2013 and 31 December 2012 credit risk of Company in terms of financial instruments is as

follows:

30 June 2013

Trade receivables Other receivables Bank

Related

party

Third

party

Related

party

Third

party Related party

Other

Maximum net credit risk as of balance

sheet date (A+B+C+D+E) (*) 3,738,324 76,726,356 382,197 22,613,534 317,062 161,439

The part of maximum risk under guarantee

with collateral - 33,625,441 - - - -

A. Net book value of financial assets that are

neither overdue nor impaired 3,738,324 67,164,814 382,197 22,613,534 317,062 16,439

B. Net book values of financial assets that

are renegotiated, if NOTE that will be

accepted as overdue or impaired - - - - - -

C. Book value of financial assets that are

overdue but NOTE impaired (**) - 3,071,507 - - - -

- The part under guarantee with collateral

etc - - - - - -

D. Net book value of impaired assets - 6,490,035 - - - -

- Overdue (gross book value amount) - 29,638,200 - - - -

- Impairment (-) - (23,148,165) - - - -

The part of net value under guarantee with

collateral etc - - - - - -

Non overdue (gross book value amount) - - - - - -

Impairment (-) - - - - - -

- The part of net value under guarantee

with collateral - - - - - -

E. Factors Including Off-Balance Sheet Risk - - - - - -

(*) This line represents the total of the rows A, B, C, D and E factors mitigating credit risk such as guarantees

received have not been taken into consideration.

(**) As of 30 June 2013 explanations related to the aging of overdue but not impaired receivables are

mentioned in Note 10.





-69-

31 December 2012

Trade receivables Other receivables Bank

Related

party

Third

party

Related

party

Third

party Deposits Other

Maximum net credit risk as of balance

sheet date (A+B+C+D+E) (*) 9,529,594 49,569,532 833,101 10,461,855 1,487,435 92,887

The part of maximum risk under guarantee

with collateral - 18,240,000 - - - -

A. Net book value of financial assets that are

neither overdue nor impaired 9,529,594 48,450,201 833,101 10,461,855 1,487,435 92,887

B. Net book values of financial assets that

are renegotiated, if NOTE that will be

accepted as overdue or impaired - - - - - -

C. Book value of financial assets that are

overdue but NOTE impaired (**) - 783,889 - - - -

- The part under guarantee with collateral

etc - - - - - -

D. Net book value of impaired assets - 335,442 - - - -

- Overdue (gross book value amount) - 23,315,091 - - - -

- Impairment (-) - (22,979,649) - - - -

The part of net value under guarantee with

collateral etc - - - - - -

Non overdue (gross book value amount) - - - - - -

Impairment (-) - - - - - -

- The part of net value under guarantee

with collateral - - - - - -

E. Factors Including Off-Balance Sheet Risk - - - - - -

(*) This line represents the total of the rows A, B, C, D and E. Factors mitigating credit risk such as

guarantees received have not been taken into consideration.

(**) As of 31 December 2012 explanations related to the aging of overdue but not impaired receivables are

mentioned in Note 10.





-70-

Interest Rate Risk

The value of a financial instrument will fluctuate as a result of changes in market prices whether those changes

are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the

market. The Company‘s interest rate risk is primarily attributable to its borrowings.

Although interest rates of financial borrowings with interest may change, financial assets with interest have fixed

interest rate and cash flows in future do not change with the extent of these assets. Risk exposure to changing

market interest rate of the Company, is mostly based on the borrowing liabilities with variable interest rate of the

Company. The policy of the Company is managing interest cost by using borrowings with fixed and variable

interest.

Interest rate sensitivity

If the interest rates of variable interest-bearing USD and EUR denominated borrowings were 100 basis points

(1%) higher / lower with all other variables held constant, profit before tax for the year would have been

lower/higher by TRY 145,702 at 30 June 2013, due to higher / lower interest expense ( 01 January-31

December 2012 TRY 146,587).

Liquidity risk

Fair liquidity risk management implies maintaining sufficient cash and marketable securities, the availability

of funding through an adequate amount of committed credit facilities and the ability to close out market

positions. Due to the dynamic nature of the underlying business the Group aims at maintaining flexibility in

funding by keeping committed credit lines. The Group management manages liquidity risk by distributing the

funds and by keeping sufficient cash and cash equivalents resources to cover the current and possible

liabilities. As of 30 June 2013 and 31 December 2012 liquidity risk table of the Group is as following;

30 June 2013 Book value

Cash outflow

according to

agreement

(=I+II+III)

Less than 3

months (I)

Between 3-

12 months

(II)

Between 1-

5 years

(III)

More

than 5

years

(IV)

Non-derivative financial liabilities

Financial liabilities 35,637,643 42,543,369 1,936,007 11,003,060 29,604,302 -

Trade payables

Related party 31,331 31,331 31,331 - - -

Third party 34,620,351 35,233,326 25,475,363 5,296,145 4,461,818 -

Other payables

Related party - - - - - -

Third party 127,362 127,362 127,362 - - -

Provisions and other liabilities 27,771,549 27,771,549 12,373,051 11,397,209 4,001,289 -

98,188,236 105,706,937 39,943,114 27,696,414 38,067,409 -





-71-

31 December 2012 Book value

Cash outflow

according to

agreement

(=I+II+III)

Less than 3

months (I)

Between 3-

12 months

(II)

Between 1- 5

years (III)

More

than 5

years

(IV)

Non-derivative financial liabilities

Financial liabilities 28,223,166 29,578,072 5,521,790 15,416,078 8,640,204 -

Trade payables

Related party 161,643 161,643 - 161,643 - -

Third party 33,885,486 34,664,967 19,499,070 9,639,402 5,526,495

Other payables

Related party - - - - - -

Third party 135,622 135,622 135,622 - - -

Provisions and other liabilities 20,375,139 20,375,139 638,428 18,455,461 1,281,250 -

82,781,056 84,915,443 25,794,910 43,672,584 15,447,949 -

Foreign Currency Risk

The effects occurring from exchange rate fluctuation, in case of having foreign currency assets, liabilities, off-

balance sheet liabilities, are foreign currency risk. Transactions in foreign currencies during the year have

been translated at the exchange rate prevailing at dates of the transactions. Monetary assets and liabilities

denominated in foreign currencies are translated at the exchange rates prevailing at the balance sheet dates.

Foreign exchange gains or losses arising from the settlement of such transactions and from the translation of

monetary assets and liabilities are recognized in the statement of profit/loss. Monetary liabilities of the

Company exceed monetary assets of the Group; in case of exchange rate rise, the Group is exposed to foreign

currency risk.

As of 30 June 2013 and 31 December 2012 exchange rates are as following;

30.06.2013 31.12.2012

USD 1.9248 1.7826

EUR 2.5137 2.3517

GBP 2.9292 2.8708

CHF 2.0323 1.9430

RUB 0.05843 0.05782





-72-

Foreign Currency Risk Sensitivity

As of 30 June 2013, if TRY evaluates / devaluates against foreign currency by 10% and all other variables

remains the same, profit before tax which occurs as a result of the foreign exchange loss / gain arising from net

foreign exchange exposure would have been TRY 1,720,276 more / less.

FX Sensitivity Analysis by Fx Type

As of 01.01. - 30.06.2013

Profit / (Loss)

Appreciation of foreign

currency

Appreciation of foreign currency

against TRY against TRY

In case of appreciation / depreciation of USD against TRY by

10%

1-USD net asset / liability (1,203,837) 1,203,837

2- Hedged amount against USD risk (-) - -

3-USD net effect (1+2) (1,203,837) 1,203,837

In case of appreciation / depreciation of EUR against TRY by

10%

4- EUR net asset / liability (2,752,647) 2,752,647

5- Hedged amount against EUR risk (-) - -

6- EUR net effect (4+5) (2,752,647) 2,752,647

In case of appreciation / depreciation of GBP against TRY by 10%

7- GBP net asset / liability 26 (26)

8- Hedged amount against GBP risk (-) - -

9- GBP net effect (7+8) 26 (26)

In case of appreciation / depreciation of CHF against TRY by 10%

10- CHF net asset / liability 12 (12)

11- Hedged amount against CHF risk (-) - -

12- CHF net effect (10+11) 12 (12)

TOTAL (3+6+9+12) (3,956,446) 3,956,446





-73-

As of 31 December 2012, if TRY evaluates / devaluates against foreign currency by 10% and all other variables

remains the same, profit before tax which occurs as a result of the foreign exchange loss / gain arising from net

foreign exchange exposure would have been TRY 4,204,767 more / less.

FX Sensitivity Analysis by Fx Type

As of 01.01. - 31.12.2012

Profit / (Loss)

Appreciation of foreign

currency

Appreciation of foreign currency

against TRY against TRY

In case of appreciation / depreciation of USD against TRY by 10%

1-USD net asset / liability (1,753,410) 1,753,410

2- Hedged amount against USD risk (-) - -

3-USD net effect (1+2) (1,753,410) 1,753,410

In case of appreciation / depreciation of EUR against TRY by 10%

4- EUR net asset / liability (2,451,386) 2,451,386

5- Hedged amount against EUR risk (-) - -

6- EUR net effect (4+5) (2,451,386) 2,451,386

In case of appreciation / depreciation of GBP against TRY by

10%halinde

7- GBP net asset / liability 26 (26)

8- Hedged amount against GBP risk (-) - -

9- GBP net effect (7+8) 26 (26)

In case of appreciation / depreciation of CHF against TRY by 10%

10- CHF net asset / liability 3 (3)

11- Hedged amount against CHF risk (-) - -

12- CHF net effect (10+11) 3 (3)

TOTAL (3+6+9+12) (4,204,767) 4,204,767





-74-

As of 30 June 2013, amounts of assets and liabilities of the Company in foreign currency are as follows:

30 June 2013

TRY

equivalent

functional

currency

USD EUR GBP RUB

1. Trade Receivables 12,769,892 4,590,685 1,564,921 - -

2a. Monetary Financial Assets (including cash, banks) 10,732,010 2,207,530 2,578,895 91 2,089

2b. Non-monetary financial assets - - - - -

3. Other - - - - -

4. Current Assets (1+2+3) 23,501,902 6,798,215 4,143,816 91 2,089

5. Trade Receivables - - - - -

6a. Monetary financial assets - - - - -


7. Other - - - - -

8. Non-Current Assets (5+6+7) - - - - -

9. Total Assets (4+8) 23,501,902 6,798,215 4,143,816 91 2,089

10. Trade Payables 26,910,521 9,468,336 3,455,412 - -

11. Financial Liabilities 8,515,166 2,109,815 1,771,968 - -

12a. Other monetary financial liabilities 1,785,136 924,417 2,314 - -

12b. Other non-monetary financial liabilities - - - - -

13. Current Liabilities (10+11+12) 37,210,823 12,502,567 5,229,694 - -

14. Trade Payables - - - - -

15. Financial Liabilities 25,855,551 550,000 9,864,706 - -

16a. Other monetary financial liabilities - - - - -


17. Non-Current Liabilities (14+15+16) 25,855,551 550,000 9,864,706 - -

18. Total Liabilities (13+17) 63,066,374 13,052,567 15,094,400 - -

19. Net asset / liability position of off- balance sheet

derivative instruments (19a-19b) - - - - -

19a. Hedged amount of assets - - - - -

19b. Hedged amount of liabilities position - - - - -

20. Net foreign currency position asset / liabilities (9-

18+19) (39,564,472) (6,254,352) (10,950,584) 91 2,089

21. Net foreign currency asset / liability position of

monetary items (UFRS 7.B23) (=1+2a+5+6a-10-11-

12a-14-15-16a) (39,564,472) (6,254,352) (10,950,584) 91 2,089

22. Fair value of derivative instruments used in

foreign currency hedge - - - - -

23. Exports 17,534,716 7,510,537 1,338,240 - -

24. Imports 25,765,376 12,318,603 1,392,408 - -





-75-

As of 31 December 2012, amounts of assets and liabilities of the Company in foreign currency are as

follows:

31 December 2012

TRY

equivalent

functional

currency

USD EUR GBP RUB

1. Trade Receivables 13,015,296 6,909,108 297,283 - -

2a. Monetary Financial Assets (including cash, banks) 775,714 270,013 125,058 91 15


3. Other 833,827 467,759 - - -

4. Current Assets (1+2+3) 14,624,837 7,646,880 422,341 91 15

5. Trade Receivables 58,078 - 24,696 - -

6a. Monetary financial assets - - - - -

6b. Non-monetary financial assets 938,284 38,335 369,923 - -

7. Other - - - - -

8. Non-Current Assets (5+6+7) 996,362 38,335 394,619 - -

9. Total Assets (4+8) 15,621,199 7,685,215 816,960 91 15

10. Trade Payables 26,701,574 13,762,424 922,174 - -

11. Financial Liabilities 15,575,706 2,833,334 4,475,488 - -


12b. Other non-monetary financial liabilities 1,670,963 925,708 8,843 - -

13. Current Liabilities (10+11+12) 43,948,243 17,521,466 5,406,505 - -

14. Trade Payables 5,526,495 - 2,350,000 - -

15. Financial Liabilities 8,194,127 - 3,484,342 - -



17. Non-Current Liabilities (14+15+16) 13,720,622 - 5,834,342 - -

18. Total Liabilities (13+17) 57,668,865 17,521,466 11,240,847 - -

19. Net asset / liability position of off- balance sheet

derivative instruments (19a-19b) - - - - -

19a. Hedged amount of assets - - - - -

19b. Hedged amount of liabilities position - - - - -

20. Net foreign currency position asset / liabilities (9-

18+19) (42,047,666) (9,836,251) (10,423,887) 91 15

21. Net foreign currency asset / liability position of

monetary items (UFRS 7.B23) (=1+2a+5+6a-10-11-12a-

14-15-16a) (42,148,814) (9,416,637) (10,784,967) 91 15

22. Fair value of derivative instruments used in

foreign currency hedge - - - - -

23. Exports 39,413,684 21,988,142 - - -

24. Imports 47,996,576 26,776,374 - - -





-76-

Capital Risk Management

In capital management, the Group‘s aims at enhancing profitability while keeping a reasonable leverage, on

the other hand rendering sustainability in its operations.

The Group follows capital by using debt to equity ratio. This rate is found by dividing net debt to total equity.

Net debt is calculated by deducting cash and cash equivalents from total payable amount (as shown in balance

sheet, trade and other payables and loans). Total capital, as shown in balance sheet, is calculated by adding up

equity and net debt.

As of 30 June 2013, 31 December 2012 net debt / total equity ratio is as follows;

30.06.2013 31.12.2012

Total debts 108,838,915 93,566,573

Less: Liquid assets 563,110 1,662,350

Net debt 108,275,805 91,904,223

Total equity 184,476,288 136,752,589

Total capital 292,752,093 228,656,812

Net Debt/Total Equity ratio %37 %41

NOTE 33 – FINANCIAL INSTRUMENTS (FAIR VALUE DISCLOSURES AND HEDGE

ACCOUNTING DISCLOSURES)

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between

willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if

one exists. The estimated fair values of financial instruments have been determined by the Group using

available markets information in Turkey and appropriate valuation methodologies. However, judgment is

necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented

herein are not necessarily indicative of the amounts the Group could realize in a current market exchange.

The following methods and assumptions are utilized for the current values of financial instruments which are

predictable in practice:

Financial Assets

Monetary assets for which fair value approximates carrying value:

-Balances denominated in foreign currencies are converted at period exchange rates.

-The fair value of certain financial assets carried at cost, including cash and cash equivalents are considered

to approximate their respective carrying amounts in the financial statements.

-The carrying value of trade receivables, net of allowances for possible non-recovery of uncollectible are

considered to approximate their fair values.





-77-

Financial Liabilities

Monetary liabilities for which fair value approximates carrying value:

-The fair value of short-term bank loans and other monetary liabilities are considered to approximate their

respective carrying values due to their short-term nature.

-The fair values of long-term bank borrowings, which are denominated in foreign currencies and converted at

period exchange rates, are considered to approximate their carrying values.

-The carrying amount of accounts payable and accrued expenses reported in the financial statements for

estimated third party payer settlements approximates its fair values.

NOTE 34 – POST BALANCE SHEET EVENTS

At 15 July 2013, Company has opened owned showroom to sell carpets in Bismil/Diyarbakır.

NOTE 35 – OTHER ISSUES AFFECTING THE CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANTLY OR REQUIRED TO BE DISCLOSED FOR CLEAR, UNDERSTANDABLE AND

INTERPRETABLE PRESENTATION


royal hali İplİk tekstİl mobİlya sanayİ ve tİcaret …2).pdfroyal hali İplİk tekstİl...

Documents